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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1998
REGISTRATION NO. 333-60355
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
(Exact name of co-registrant as specified in its charter)
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MARYLAND 84-1275621
DELAWARE 84-1259577
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
1873 SOUTH BELLAIRE STREET, 17TH FLOOR PETER KOMPANIEZ
DENVER, COLORADO 80222 PRESIDENT
(303) 757-8101 1873 SOUTH BELLAIRE STREET, 17TH FLOOR
DENVER, COLORADO 80222
(303) 757-8101
FAX: (303) 753-9538
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of co-registrants' principal number,
executive offices) including area code, of agent for service)
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Copy to:
JONATHAN L. FRIEDMAN
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
FAX: (213) 687-5600
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Approximate Date of Commencement of Proposed Sale to the Public: From time
to time after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and if there is compliance
with General Instruction G, check the following box. [ ]
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT(1) AGGREGATE OFFERING PRICE REGISTRATION FEE(2)
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Preferred Stock, par value $.01
per share(3)....................
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Class A Common Stock, par value
$.01 per share(3)...............
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Partnership Preferred Units(4).... $200,000,000 $200,000,000
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Partnership Common Units(4)....... $200,000,000 $200,000,000
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Total.................... $1,000,000,000 (1) $1,000,000,000 $295,000
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(1) To be determined, from time to time, by the Registrants in connection with
the issuance of the securities registered hereunder.
(2) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
(3) To be issued by Apartment Investment and Management Company ("AIMCO"). The
amount of such securities registered hereby includes (i) shares of Preferred
Stock and Class A Common Stock of AIMCO issuable in exchange for Partnership
Preferred Units or Partnership Common Units of AIMCO Properties, L.P.
tendered for redemption pursuant to the agreement of limited partnership of
AIMCO Properties, L.P., plus such additional number of shares of Preferred
Stock and Class A Common Stock as may be issuable pursuant to the
antidilution adjustment provisions of such agreement and (ii) shares of
Class A Common Stock of AIMCO issuable upon conversion of shares of
Preferred Stock of AIMCO. In no event will the aggregate maximum offering
price of all securities registered under this Registration Statement by
AIMCO exceed $600,000,000.
(4) To be issued by AIMCO Properties, L.P.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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EXPLANATORY NOTE
This filing includes (i) a base prospectus to be used for the offering and
issuance of securities in connection with acquisitions of businesses,
properties, securities or other assets reflecting certain changes, (ii) 45
additional prospectus supplements relating to exchange offers for units of
limited partnership interest in the limited partnerships set forth below, (iii)
a form of a Letter of Transmittal and (iv) a form of Cover Letter to the holders
of the partnership units.
Angeles Income Properties, Ltd. II
Angeles Income Properties, Ltd. III
Angeles Income Properties, Ltd. IV
Angeles Income Properties, Ltd. 6
Angeles Opportunity Properties, Ltd.
Angeles Partners VII
Angeles Partners VIII
Angeles Partners IX
Angeles Partners X
Angeles Partners XI
Angeles Partners XII
Angeles Partners XIV
Century Properties Fund XVI
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Growth Fund XXII
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Davidson Diversified Real Estate I, L.P.
Davidson Diversified Real Estate II, L.P.
Davidson Diversified Real Estate III, L.P.
Davidson Growth Plus, L.P.
Davidson Income Real Estate, L.P.
Drexel Burnham Lambert Real Estate Associates II
Fox Strategic Housing Income Partners
HCW Pension Real Estate Fund Limited
Partnership
Investors First-Staged Equity
Johnstown/Consolidated Income Partners
Multi-Benefit Realty Fund '87-1-Class A
Multi-Benefit Realty Fund '87-1-Class B
National Property Investors 8
Riverside Park Associates L.P.
Shelter Properties III
Shelter Properties VI
Shelter Properties VII Limited Partnership
Springhill Lake Investors Limited Partnership
U.S. Realty Partners Limited Partnership
United Investors Growth Properties
United Investors Growth Properties II
United Investors Income Properties
Winthrop Growth Investors 1 Limited Partnership
In accordance with Rule 472(b) the Registrants have not refiled the 45
prospectus supplements filed with Amendment No. 2 since no changes have yet been
made to such prospectus supplements. The 45 prospectus supplements filed with
Amendment No. 2 continue to remain part of this Registration Statement and will
be refiled with future Amendments when changes are made to a particular
prospectus supplement.
Baywood Partners, Ltd.
Brampton Associates Partnership
Buccaneer Trace Limited Partnership
Burgundy Court Associates, L.P.
Calmark/Fort Collins, Ltd.
Calmark Heritage Park II Ltd.
Casa Del Mar Associates Limited Partnership
Catawba Club Associates, L.P.
Cedar Tree Investors Limited Partnership
Chapel Hill, Limited
Chestnut Hill Associates Limited Partnership
Coastal Commons Limited Partnership
DFW Apartment Investors Limited Partnership
DFW Residential Investors Limited Partnership
Four Quarters Habitat Apartment Associates, Ltd.
Georgetown of Columbus Associates, L.P.
La Colina Partners, Ltd.
Lake Eden Associates, L.P.
Landmark Associates, L.P.
Minneapolis Associates II Limited Partnership
Northbrook Apartments, Ltd.
Olde Mill Investors Limited Partnership
Orchard Park Apartments Limited Partnership
Park Town Place Associates Limited Partnership
Quail Run Associates, L.P.
Ravenworth Associates Limited Partnership
Rivercreek Apartments Limited Partnership
Rivercrest Apartments, Limited
Salem Arms of Augusta Limited Partnership
Shaker Square, L.P.
Shannon Manor Apartments, a Limited Partnership
Sharon Woods, L.P.
Snowden Village Associates, L.P.
Sturbrook Investors, Ltd.
Sycamore Creek Associates, L.P.
Texas Residential Investors Limited Partnership
Thurber Manor Associates, Limited Partnership
Villa Nova, Limited Partnership
Walker Springs, Limited
Wingfield Investors Limited Partnership
Winrock-Houston Limited Partnership
Winthrop Apartment Investors Limited Partnership
Winthrop Texas Investors Limited Partnership
Woodmere Associates, L.P.
Yorktown Towers Associates
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
$600,000,000 OF
PREFERRED STOCK AND
CLASS A COMMON STOCK
AIMCO PROPERTIES, L.P.
$200,000,000 OF PARTNERSHIP PREFERRED UNITS
$200,000,000 OF PARTNERSHIP COMMON UNITS
We may offer and issue these securities in connection with acquisitions of
businesses, properties, securities or other assets. In addition, we may issue
our Class A Common Stock upon conversion of shares our Preferred Stock, and we
may also issue shares of our Preferred Stock and shares of our Class A Common
Stock in exchange for our Partnership Preferred Units or our Partnership Common
Units tendered for redemption.
Apartment Investment and Management Company has elected to be taxed for
Federal income tax purposes as a REIT. Our Class A Common Stock is listed on the
New York Stock Exchange under the symbol "AIV." On October 20, 1998, the last
reported sales price of our Class A Common Stock on the NYSE was $33 7/16 per
share. There is no public market for our Partnership Preferred Units or our
Partnership Common Units. However, after a one-year holding period, each of our
Partnership Common Units may be redeemed in exchange for a share of our Class A
Common Stock or, at our option, a cash amount equal to the market value of one
share of our Class A Common Stock at the time of the redemption (subject to
antidilution adjustments).
SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF MATERIAL RISKS
IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES, INCLUDING WITHOUT
LIMITATION, THE FOLLOWING RISKS:
- Our acquisition and development activities expose us to several negative
factors, including difficulty in managing our rapid growth, the
incurrence of unforeseen costs, possible failure to realize projected
occupancy and rental rates.
- Our organizational documents do not limit the amount of debt that we may
incur, and our Board of Directors may change our leverage policy at any
time. Our cash flow from operations might be insufficient to make
required debt payments, and we might be unable to refinance our debt at
all or on terms as favorable as the terms of our existing debt. In
addition, we are subject to debt covenants that may restrict our ability
to make distributions to investors.
- Our real estate investment and management activities expose us to several
potentially negative factors that are beyond our control such as local
economic conditions, intense competition, potential environmental
liabilities and change of laws, any of which could negatively affect our
financial condition or results of operations.
- We and certain of our officers and/or directors and unconsolidated
subsidiaries have entered into, and may in the future into certain
transactions that may result in conflicts of interest between the us and
such officers and/or directors and unconsolidated subsidiaries.
- If Apartment Investment and Management Company fails to qualify as a
REIT, it (i) would not be allowed a deduction for dividends it pays, (ii)
would be subject to federal income tax at corporate rates, (iii) might
need to borrow funds or liquidate investments on unfavorable terms in
order to pay the applicable tax and (iv) would no longer be required to
make distributions to stockholders.
- Our charter limits the number of shares of our stock that may be held by
any one investor. Consequently, our stockholders are limited in their
ability to effect a change of our control.
- Investors in our partnership units must hold their units for one year,
subject to certain exceptions. Thereafter investors may transfer such
partnership units, subject to the satisfaction of certain conditions,
including the general partner's right of first refusal. Holders of our
partnership units do not have the ability to vote for or remove the
general partner, and therefor they can not effect a change of control of
AIMCO Properties, L.P.
To the extent not otherwise described herein, the form in which the
securities are to be issued, and the terms of such securities, including without
limitation, their specific designation, or aggregate initial offering price,
rate and times of payment of dividends, if any, redemption, conversion and
exchange terms, if any, voting or other rights, if any, and other specific terms
will be set forth in a Prospectus Supplement, together with the terms of
offering of such securities.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is , 1998.
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TABLE OF CONTENTS
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THE COMPANY..................................... 1
RISK FACTORS.................................... 2
Risks of Acquisition and Development
Activities.................................. 2
Risks Associated With Debt Financing.......... 3
Moody's Negative Outlook for AIMCO Ratings.... 3
Increases in Interests Rates May Increase our
Interest Expense............................ 3
Risks of Interest Rate Hedging Arrangements... 3
Covenant Restrictions May Limit Our Ability to
Make Payments to Our Investors.............. 4
We Depend on Distributions and Other Payments
from Our Subsidiaries....................... 4
Real Estate Investment Risks.................. 4
Possible Environmental Liabilities............ 4
Laws Benefitting Disabled Persons May Result
in Unanticipated Expenses................... 5
Risks Relating to Regulation of Affordable
Housing..................................... 5
The Loss of Property Management Contracts
Would Reduce Our Revenues................... 5
Dependence on Certain Executive Officers...... 5
Possible Conflicts of Interest; Transactions
with Affiliates............................. 6
Tax Risks..................................... 6
Possible Adverse Consequences of Limits on
Ownership of Shares......................... 7
Our Charter and Maryland Law May Limit the
Ability of a Third Party to Acquire Control
of the Company.............................. 7
Risks Relating to Year 2000 Issues............ 8
Risks Associated With an Investment in OP
Units....................................... 8
SECURITIES COVERED BY THIS PROSPECTUS........... 14
RATIO OF EARNINGS TO FIXED CHARGES.............. 16
SELECTED HISTORICAL FINANCIAL DATA.............. 17
PER SHARE AND PER UNIT DATA..................... 20
Per Share Data................................ 20
Per Unit Data................................. 20
Stock Prices, Dividends and Distributions..... 21
BUSINESS OF THE COMPANY......................... 22
Operating and Financial Strategies............ 22
Growth Strategies............................. 23
Property Management Strategies................ 26
Accounting Policies and Definitions........... 28
Policies of the Company with Respect to
Certain Other Activities.................... 29
Year 2000 Compliance.......................... 31
DESCRIPTION OF PREFERRED STOCK.................. 31
General....................................... 31
Dividends..................................... 32
Convertibility................................ 33
Redemption and Sinking Fund................... 33
Liquidation Rights............................ 33
Voting Rights................................. 33
Miscellaneous................................. 34
Other Rights.................................. 34
Transfer Agent and Registrar.................. 34
Class B Preferred Stock....................... 34
Class C Preferred Stock....................... 36
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Class D Preferred Stock....................... 37
Class E Preferred Stock....................... 38
Class G Preferred Stock....................... 39
Class H Preferred Stock....................... 40
DESCRIPTION OF COMMON STOCK..................... 41
General....................................... 41
Class A Common Stock.......................... 41
Restrictions on Transfer...................... 42
Class B Common Stock.......................... 43
Business Combinations......................... 44
Control Share Acquisitions.................... 45
DESCRIPTION OF OP UNITS......................... 45
General....................................... 45
Purpose and Business.......................... 46
Management by the AIMCO GP.................... 46
Management Liability and Indemnification...... 47
Compensation and Fees......................... 47
Fiduciary Responsibilities.................... 47
Class B Partnership Preferred Units........... 48
Class C Partnership Preferred Units........... 49
Class D Partnership Preferred Units........... 49
Class E Partnership Preferred Units........... 49
Class F Partnership Preferred Units........... 49
Class G Partnership Preferred Units........... 50
Class H Partnership Preferred Units........... 50
High Performance Units........................ 50
Distributions................................. 51
Allocations of Net Income and Net Loss........ 52
Withholding................................... 53
Return of Capital............................. 53
Redemption Rights............................. 53
Partnership Right to Call Common OP Units..... 53
Transfers and Withdrawals..................... 54
Issuance of Capital Stock by AIMCO............ 55
Dilution...................................... 55
Amendment of the AIMCO Operating Partnership
Agreement................................... 55
Procedures for Actions and Consents of
Partners.................................... 56
Records and Accounting; Fiscal Year........... 56
Reports....................................... 56
Tax Matters................................... 56
Dissolution and Winding Up.................... 57
COMPARISON OF THE AIMCO OPERATING PARTNERSHIP
AND AIMCO..................................... 58
COMPARISON OF COMMON OP UNITS AND CLASS A COMMON
STOCK......................................... 65
FEDERAL INCOME TAXATION OF AIMCO AND AIMCO
STOCKHOLDERS.................................. 67
General....................................... 67
Tax Aspects of AIMCO's Investments in
Partnerships................................ 72
Taxation of Management Subsidiaries........... 73
Taxation of Taxable Domestic Stockholders..... 73
Taxation of Foreign Stockholders.............. 74
Information Reporting Requirements and Backup
Withholding................................. 76
Taxation of Tax-Exempt Stockholders........... 76
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FEDERAL INCOME TAXATION OF THE AIMCO OPERATING
PARTNERSHIP AND OP UNITHOLDERS................ 77
Partnership Status............................ 77
Taxation of OP Unitholders.................... 79
Allocations of AIMCO Operating Partnership
Profits and Losses.......................... 79
Tax Basis of a Partnership Interest........... 79
Cash Distributions............................ 80
Tax Consequences Upon Contribution of Property
to the AIMCO Operating Partnership.......... 80
Limitations on Deductibility of Losses........ 81
Section 754 Election.......................... 82
Depreciation.................................. 82
Sale, Redemption, or Exchange of OP Units..... 83
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Termination of the AIMCO Operating
Partnership................................. 83
Alternative Minimum Tax....................... 84
Information Returns and Audit Procedures...... 84
Taxation of Foreign OP Unitholders............ 85
OTHER TAX CONSEQUENCES.......................... 85
Possible Legislative or Other Actions
Affecting REITs............................. 85
State, Local and Foreign Taxes................ 85
WHERE YOU CAN FIND MORE INFORMATION............. 85
LEGAL MATTERS................................... 86
EXPERTS......................................... 87
APPENDIX A: GLOSSARY............................ A-1
APPENDIX B: THIRD AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES,
L.P........................................... B-1
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THE COMPANY
Apartment Investment and Management Company ("AIMCO"), a Maryland
corporation formed on January 10, 1994, is a self-administered and self-managed
REIT engaged in the ownership, acquisition, development, expansion and
management of multi-family apartment properties. As of October 1, 1998, we owned
or managed 396,090 apartment units in 2,303 properties located in 49 states, the
District of Columbia and Puerto Rico. Based on apartment unit data compiled as
of January 1, 1998 by the National Multi Housing Council, we believe that, as of
October 1, 1998, we were the largest owner and manager of multifamily apartment
properties in the United States. As of October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
We conduct substantially all of our operations through AIMCO Properties,
L.P., a Delaware limited partnership (the "AIMCO Operating Partnership"). Our
wholly owned subsidiary, AIMCO-GP, Inc. (the "AIMCO GP") is the sole general
partner of the AIMCO Operating Partnership. Through the AIMCO GP and another of
our wholly owned subsidiaries, AIMCO-LP, Inc. (the "Special Limited Partner"),
as of October 1, 1998, we owned approximately an 89% interest in the AIMCO
Operating Partnership. We manage apartment properties for third parties and
affiliates through unconsolidated subsidiaries that we refer to as the
"management companies." Generally, when we refer to "we," "us" or the "Company"
in this prospectus, we are referring to AIMCO, the AIMCO Operating Partnership,
the management companies and their respective subsidiaries.
Our principal executive offices are located at 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222, and our telephone number is (303) 757-8101.
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RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included in this
prospectus before you decide to purchase our securities.
Some of the information in this prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward-looking" information. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. The risk factors noted in this section and other
factors noted throughout this prospectus, including certain risks and
uncertainties, could cause our actual results to differ materially from those
contained in any forward-looking statement.
RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES
Generally. The selective acquisition, development and expansion of
apartment properties is one component of our growth strategy. However, we can
make no assurance as to our ability to identify or complete transactions in the
future. Although we seek to acquire, develop and expand properties only when
such activities are accretive on a per share basis, such transactions may fail
to perform in accordance with our expectations. When we develop or expand
properties, we are subject to the risks that:
- costs may exceed original estimates;
- projected occupancy and rental rates at the property may not be realized;
- financing may not be available on favorable terms;
- construction and lease-up may not be completed on schedule; and
- we may experience difficulty or delays in obtaining necessary zoning,
land-use, building, occupancy, and other governmental permits and
authorizations.
We May Have Difficulty Managing Our Rapid Growth. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned or managed properties
from 132 apartment properties with 29,343 units to 2,303 apartment properties
with 396,090 units as of October 1, 1998. These acquisitions have included
purchases of properties and interests in entities that own or manage properties,
as well as corporate mergers. Our recent merger with Insignia Financial Group,
Inc. ("Insignia") is our largest acquisition so far. Our ability to successfully
integrate acquired businesses and properties depends on our ability to:
- attract and retain qualified personnel;
- integrate the personnel and operations of the acquired businesses;
- maintain uniform standards, controls, procedures and policies; and
- maintain adequate accounting and information systems.
We can provide no assurance that we will be able to accomplish these goals
and successfully integrate any acquired businesses or properties. If we fail to
successfully integrate such businesses, our results of operations could be
adversely affected.
Litigation Associated with Partnership Acquisitions. We have engaged in,
and intend to continue to engage in, the selective acquisition of interests in
limited partnerships that own apartment properties. In some cases, we have
acquired the general partner of a partnership and then made an offer to acquire
the limited partners' interests in the partnership. In these transactions, we
are subject to litigation based on claims that the general partner has breached
its fiduciary duties to its limited partners or that the transaction violates
the
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relevant partnership agreement. Although we intend to comply with our fiduciary
obligations and relevant partnership agreements, we may incur additional costs
in connection with the defense or settlement of such litigation. In some cases,
such litigation may adversely affect our desire to proceed with, or our ability
to complete, a particular transaction. Such litigation could also have a
material adverse effect on our results of operations.
RISKS ASSOCIATED WITH DEBT FINANCING
Our strategy is generally to incur debt to increase the return on our
equity while maintaining acceptable interest coverage ratios. We seek to
maintain a ratio of free cash flow to combined interest expense and preferred
stock dividends of between 2:1 and 3:1. However, our Board of Directors could
change this strategy at any time and increase our leverage. Our organizational
documents do not limit the amount of debt that we may incur, and we have
significant amounts of debt outstanding. Payments of principal and interest may
leave us with insufficient cash resources to operate our properties or pay
distributions required to be paid in order to maintain our qualification as a
REIT. We are also subject to the risk that our cash flow from operations will be
insufficient to make required payments of principal and interest, and the risk
that existing indebtedness may not be refinanced or that the terms of any
refinancing will not be as favorable as the terms of existing indebtedness. If
we fail to make required payments of principal and interest on any debt, our
lenders could foreclose on the properties securing such debt with a consequent
loss of income and asset value to us. As of June 30, 1998, 94% of the properties
that we own or control and 43% of our assets were encumbered by debt. On a pro
forma basis, giving effect to the recent Insignia merger, as of June 30, 1998,
we had $1,491 million of indebtedness outstanding on a consolidated basis, of
which $1,469 million was secured.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS
Recently, Moody's Investors Service ("Moody's") revised its outlook for our
ratings from stable to negative to reflect its concerns surrounding our ability
to successfully implement our financial strategy while maintaining a prudent
capital structure as a result of more difficult general capital market
conditions. Moody's noted that our access to the public markets may prove
challenging in light of the volatility in both the equity and capital markets
for REITs and assigned a "ba3" rating to a class of preferred stock proposed to
be issued by us. Moody's indicated that its rating action reflects our
increasing leveraged profile, including high levels of secured debt and
preferred stock, limited financial flexibility and integration risks resulting
from the merger with Insignia. Moody's also noted our high level of encumbered
properties and material investments in loans to highly leveraged partnerships in
which we own a general partnership interest. At the same time, Moody's, Standard
& Poors and Duff & Phelps confirmed their existing ratings on our preferred
stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE
As of June 30, 1998, approximately $182 million of our debt was subject to
variable interest rates. An increase in interest rates could increase our
interest expense and adversely affect our cash flow and our ability to service
our indebtedness and make distributions.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS
From time to time, in anticipation of refinancing debt, we enter into
agreements to reduce the risks associated with increases in short term interest
rates. Although these agreements provide us with some protection against rising
interest rates, these agreements also reduce the benefits to us when interest
rates decline. These agreements involve the following risks:
- interest rate movements during the term of the agreement may result in a
gain or loss to us;
- we may be exposed to losses if the hedge is not indexed to the same rate
as the debt anticipated to be incurred; and
- if the counterparty to the agreement fails to pay, we may incur a loss.
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COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR INVESTORS
Some of our debt and other securities contain covenants that restrict our
ability to make distributions or other payments to our investors unless certain
financial tests or other criteria are satisfied. In some cases, our subsidiaries
are subject to similar provisions, which may restrict their ability to make
distributions to us. Our primary credit facility provides that we may make
distributions to our investors during any 12-month period in an aggregate amount
that does not exceed the greater of 80% of our funds from operations for such
period or such amount as may be necessary to maintain our REIT status. This
credit facility prohibits all distributions if certain financial ratios and
tests are not satisfied. The preferred stock that we issued in the Insignia
merger prohibits the payment of dividends on our common stock if we fail to make
the payments required by the preferred stock.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES
All of our properties are owned, and all of our operations are conducted,
by the AIMCO Operating Partnership and our other subsidiaries. As a result, we
depend on distributions and other payments from subsidiaries in order to satisfy
our financial obligations and make payments to our investors. The ability of our
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations. As an
equity investor in our subsidiaries, our right to receive assets upon their
liquidation or reorganization will be effectively subordinated to the claims of
their creditors. To the extent that we are recognized as a creditor of such
subsidiaries, our claims would still be subordinated to any security interest in
or other lien on their assets and to any of their debt or other obligations that
are senior to us.
REAL ESTATE INVESTMENT RISKS
Our ability to make payments to our investors depends on our ability to
generate funds from operations in excess of required debt payments and capital
expenditure requirements. Funds from operations and the value of our properties
may be adversely affected by events or conditions which are beyond our control.
Such events or conditions could include:
- the general economic climate;
- competition from other apartment communities and alternative housing;
- local conditions, such as an increase in unemployment or an oversupply of
apartments, that might adversely affect apartment occupancy or rental
rates;
- increases in operating costs (including real estate taxes) due to
inflation and other factors, which may not necessarily be offset by
increased rents;
- changes in governmental regulations and the related costs of compliance;
- changes in tax laws and housing laws, including the enactment of rent
control laws or other laws regulating multifamily housing;
- changes in interest rate levels and the availability of financing; and
- the relative illiquidity of real estate investments.
POSSIBLE ENVIRONMENTAL LIABILITIES
Various Federal, state and local laws subject property owners or operators
to liability for the costs of removal or remediation of certain hazardous
substances released on a property. Such laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
release of the hazardous substances. The presence of, or the failure to properly
remediate, hazardous substances may adversely affect occupancy at contaminated
apartment communities and our ability to sell or borrow against contaminated
properties. In addition to the costs associated with investigation and
remediation actions brought by governmental agencies, the presence of hazardous
wastes on a property could result in personal injury or
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similar claims by private plaintiffs. Various laws also impose, on persons who
arrange for the disposal or treatment of hazardous or toxic substances,
liability for the cost of removal or remediation of hazardous substances at the
disposal or treatment facility. These laws often impose liability whether or not
the person arranging for the disposal ever owned or operated the disposal
facility.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED EXPENSES
Under the Americans with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain Federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. A number of additional Federal, state and local laws exist
which also may require modifications to our properties, or restrict certain
further renovations of the properties, with respect to access thereto by
disabled persons. For example, the Fair Housing Amendments Act of 1988 (the
"FHAA") requires apartment properties first occupied after March 13, 1990 to be
accessible to the handicapped. Noncompliance with the ADA or the FHAA could
result in the imposition of fines or an award of damages to private litigants
and also could result in an order to correct any non-complying feature, which
could result in substantial capital expenditures. Although we believe that our
properties are substantially in compliance with present requirements, we may
incur unanticipated expenses to comply with the ADA and FHAA.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING
As of October 1, 1998, we owned or controlled 2 properties, held an equity
interest in 783 properties and managed for third parties and affiliates 322
properties that benefit from governmental programs intended to provide housing
to people with low or moderate incomes. These programs, which are usually
administered by the United States Department of Housing and Urban Development
("HUD") or state housing finance agencies, typically provide mortgage insurance,
favorable financing terms or rental assistance payments to the property owners.
As a condition to the receipt of assistance under these programs, the properties
must comply with various requirements, which typically limit rents to
pre-approved amounts. If permitted rents on a property are insufficient to cover
costs, a sale of the property may become necessary, which could result in a loss
of management fee revenue. We usually need to obtain the approval of HUD in
order to manage, or acquire a significant interest in, a HUD-assisted or
HUD-insured property. We can make no assurance that we will always receive such
approval.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES
We manage some properties owned by third parties. For the year ended
December 31, 1997, we derived approximately 2% of our gross revenue from
management of properties owned by third parties. During the same period,
Insignia, which merged with us on October 1, 1998, derived approximately 15% of
its gross revenue from management of properties owned by third parties. We may
suffer a loss of revenue if we lose our right to manage these properties or if
the rental revenues upon which our management fees are based declines. In
general, management contracts may be terminated or otherwise lost as a result
of:
- a disposition of the property by the owner in the ordinary course or as a
result of financial distress of the property owner;
- the property owner's determination that our management of the property is
unsatisfactory;
- willful misconduct, gross negligence or other conduct that constitutes
grounds for termination; or
- with respect to certain affordable properties, termination of such
contracts by HUD or state housing finance agencies, generally at their
discretion.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS
Although we have entered into employment agreements with our Chairman and
Chief Executive Officer, Terry Considine, our President, Peter K. Kompaniez and
our Executive Vice President, Steven D. Ira, the loss of any of their services
could have an adverse effect on our operations.
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POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES
We have been, and continue to be, involved in various transactions with a
number of our affiliates, including executive officers, directors and entities
in which they own interests. For example, in order to satisfy certain REIT
requirements, Messrs. Considine and Kompaniez directly or indirectly control the
management companies which manage properties for third parties and affiliates.
Although we own a 95% non-voting interest in these management companies, we have
no control over them or their operations. As a result, the management companies
could implement business decisions or policies that are not in our best
interests. We have adopted certain policies designed to minimize or eliminate
the conflicts of interest inherent in these transactions, including a
requirement that a majority of our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
TAX RISKS
Adverse Consequences of Failure to Qualify as a REIT. Although we believe
that we operate in a manner that enables us to meet the requirements for
qualification as a REIT for Federal income tax purposes, we do not plan to
request a ruling from the IRS that we qualify as a REIT. We have, however,
received an opinion from the law firm of Skadden, Arps, Slate, Meagher & Flom
LLP to the effect that, beginning with our initial taxable year ended December
31, 1994, we were organized in conformity with the requirements for
qualification as a REIT under the Internal Revenue Code and that our proposed
method of operation, and our actual method of operation since our formation
through the date of such opinion, will enable us to meet the requirements for
qualification and taxation as a REIT.
You should be aware that opinions of counsel are not binding on the IRS or
any court. Our opinion of counsel is based upon certain representations and
covenants made by us regarding the past, present and future conduct of our
business operations. Furthermore, our opinion of counsel is conditioned on, and
our continued qualification as a REIT will depend on, our ability to meet,
through actual annual operating results, the various REIT qualification tests.
Such requirements are discussed in more detail under the heading "Federal Income
Taxation of AIMCO and AIMCO Stockholders -- General."
If we fail to qualify as a REIT, we would not be allowed a deduction for
distributions to shareholders in computing our taxable income and we would be
subject to Federal income tax at regular corporate rates. We also could be
subject to the Federal alternative minimum tax. Unless we are entitled to relief
under the tax law, we could not elect to be taxed as a REIT for four years
following the year during which we were disqualified. Therefore, if we lose our
REIT status, the funds available for payment to our investors would be reduced
substantially for each of the years involved. See "Federal Income Taxation of
AIMCO and AIMCO Stockholders -- General -- Failure to Qualify." Also, if we fail
to qualify as a REIT, (i) we would be obligated to repurchase 750,000 shares of
our preferred stock at a price of $105 per share, plus accrued and unpaid
dividends to the date of repurchase, and (ii) we would be in default under our
primary credit facilities and certain other loan documents. See "Federal Income
Taxation of AIMCO and AIMCO Stockholders -- Failure to Qualify."
If we acquire a corporation that is not a REIT (such as Insignia), we will
qualify as a REIT only if we distribute all of the acquired corporation's
"earnings and profits" by the end of the year in which the acquisition occurs.
The determination of earnings and profits, however, is difficult and requires
the resolution of technical tax issues. In addition, the IRS can consider all
taxable years as open for review for purposes of determining the amount of its
earnings and profits. Our failure to distribute an amount equal to Insignia's
earnings and profits on or before December 31, 1998, would result in our failure
to qualify as a REIT.
Effect of Distribution Requirements. As a REIT, we are subject to annual
distribution requirements, which limit the amount of cash we have available for
other business purposes, including amounts to fund our growth. See "Federal
Income Taxation of AIMCO and AIMCO Stockholders -- Annual Distribution
Requirements."
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Possible Legislative or Other Actions Affecting REITs. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the tax law could adversely affect our investors. It cannot be predicted
whether, when, in what forms, or with what effective dates, the tax laws
applicable to us or our investors will be changed.
Other Tax Liabilities. Even if we qualify as a REIT, we and our
subsidiaries may be subject to certain Federal, state and local taxes on our
income and property that could reduce operating cash flow.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES
Our Charter limits ownership of our common stock by any single shareholder
to 8.7% of the outstanding shares (or 15% in the case of certain pension trusts,
registered investment companies and Mr. Considine). The Charter also prohibits
anyone from buying shares if the purchase would result in us losing our REIT
status. This could happen if a share transaction results in fewer than 100
persons owning all of our shares or in five or fewer persons, applying certain
broad attribution rules of the Internal Revenue Code, owning 50% or more of our
shares. If you or anyone else acquires shares in excess of the ownership limit
or in violation of the ownership requirements of the Internal Revenue Code for
REITs:
- the transfer will be considered null and void;
- we will not reflect the transaction on our books;
- we may institute legal action to enjoin the transaction;
- we may demand repayment of any dividends received by the affected person
on those shares;
- we may redeem the shares at their then current market price;
- the affected person will not have any voting rights for those shares; and
- the shares (and all voting and dividend rights of the shares) will be
held in trust for the benefit of one or more charitable organizations
designated by us.
We may purchase the shares held in trust at a price equal to the lesser of
the price paid by the transferee of the shares or the then current market price.
If the trust transfers any of the shares, the affected person will receive the
lesser of the price he paid for the shares or the then current market price. An
individual who acquires shares that violate the above rules bears the risk that:
- he may lose control over the power to dispose of the shares;
- he may not recognize profit from the sale of such shares if the market
price of the shares increases;
- he may be required to recognize a loss from the sale of such shares if
the market price decreases; and
- he may be required to repay any distributions received as a result of his
ownership of such shares.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO ACQUIRE
CONTROL OF THE COMPANY
Ownership Limit. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our Board of Directors.
Preferred Stock. Our Charter authorizes our Board of Directors to issue up
to 510,750,000 shares of capital stock. As of October 1, 1998, 486,027,500
shares were classified as Class A Common Stock, 262,500 shares were classified
as Class B Common Stock and 24,460,000 were classified as preferred stock. Under
the Charter, our Board of Directors has the authority to classify and reclassify
any of our unissued shares of capital stock into shares of preferred stock with
such preferences, rights, powers and restrictions as the Board of Directors may
determine. The authorization and issuance of preferred stock could have the
effect of delaying or preventing someone from taking control of us, even if a
change in control were in our shareholders' best interests.
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Maryland Business Statutes. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our shareholders' best interests. The
Maryland General Corporation Law restricts mergers and other business
combination transactions between us and any person who acquires beneficial
ownership of shares of our stock representing 10% or more of the voting power
without our Board of Directors' prior approval. Any such business combination
transaction could not be completed until five years after the person acquired
such voting power, and only with the approval of shareholders representing 80%
of all votes entitled to be cast and 66% of the votes entitled to be cast,
excluding the interested shareholder. Maryland law also provides that a person
who acquires shares of our stock that represent 20% or more of the voting power
in electing directors will have no voting rights unless approved by a vote of
two-thirds of the shares eligible to vote.
RISKS RELATING TO YEAR 2000 ISSUES
We use and depend on numerous accounting and reporting software packages
and computer hardware to conduct our business. We have appointed a team of
internal staff to determine whether these software packages and computer
hardware will function properly in the year 2000. Further, we have just begun to
evaluate the Insignia software packages and computer hardware.
Some of the properties that we own or control possess operational systems
(e.g. elevators, fire alarm and extinguishment systems and security systems). We
are currently working to identify all operational systems at these properties
that may need to be modified or replaced in order to properly function in the
year 2000. We have not yet determined the estimated cost to modify or replace
these non-compliant operational systems.
RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS
We refer to interests in the AIMCO Operating Partnership as "OP Units." The
Partnership Common Units are referred to as "Common OP Units" and the
Partnership Preferred Units are referred to as "Preferred OP Units." The
agreement of limited partnership of the AIMCO Operating Partnership is referred
to as the "AIMCO Operating Partnership Agreement."
Restrictions on Transferability of OP Units. There is no public market for
our OP Units. In addition, our partnership agreement restricts the
transferability of OP Units. Until the expiration of a one year holding period,
subject to certain exceptions, investors may not transfer OP Units without the
consent of the general partner of the AIMCO Operating Partnership. Thereafter
investors may transfer such OP Units subject to the satisfaction of certain
conditions, including the general partner's right of first refusal. See
"Description of OP Units -- Transfers and Withdrawals." We have no plans to list
our OP Units on a securities exchange. It is unlikely that any person will make
a market in our OP Units, or that an active market for our OP Units will
develop. If a market for our OP Units develops and our OP Units are considered
"readily tradable" on a "secondary market (or the substantial equivalent
thereof)," the AIMCO Operating Partnership would be classified as a publicly
traded partnership for federal income tax purposes. See "-- Tax Treatment is
Dependent on Partnership Status; Publicly Traded Partnership Risks."
Cash Distributions Are Not Guaranteed and May Fluctuate with Partnership
Performance. Although we make quarterly distributions on our OP Units, there can
be no assurance regarding the amounts of available cash that the AIMCO Operating
Partnership will generate or the portion that the general partner will choose to
distribute. The actual amounts of available cash will depend upon numerous
factors, including profitability of operations, required principal and interest
payments on our debt, the cost of acquisitions (including related debt service
payments), our issuance of debt and equity securities, fluctuations in working
capital, capital expenditures, adjustments in reserves, prevailing economic
conditions and financial, business and other factors, some of which may be
beyond the our control. Cash distributions are dependent primarily on cash flow,
including from reserves, and not on profitability, which is affected by non-cash
items. Therefore, cash distributions may be made during periods when the we
record losses and may not be made during periods when we record profits. We make
quarterly distributions to holders of Common OP Units (on a per unit basis)
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that generally are equal to the dividends paid on the Class A Common Stock (on a
per share basis). However, such distributions will not necessarily continue to
be equal to such dividends.
Our partnership agreement gives our general partner discretion in
establishing reserves for the proper conduct of the partnership's business that
will affect the amount of available cash. We are required to make reserves for
the future payment of principal and interest under our credit facilities and
other indebtedness. In addition, our credit facilities limit our ability to
distribute cash to holders of our OP Units. As a result of these and other
factors, there can be no assurance regarding our actual levels of cash
distributions on our OP Units, and our ability to distribute cash may be limited
during the existence of any events of default under any of our debt instruments.
The AIMCO GP Manages and Operates the AIMCO Operating Partnership; OP
Unitholders Have Limited Voting Rights. The AIMCO GP manages and operates the
AIMCO Operating Partnership. Unlike the holders of common stock in a
corporation, OP Unitholders have only limited voting rights on matters affecting
the AIMCO Operating Partnership's business. OP Unitholders have no right to
elect the AIMCO GP on an annual or other continuing basis, and the AIMCO GP may
not be removed by OP Unitholders. As a result, OP Unitholders have limited
influence on matters affecting the operation of the AIMCO Operating Partnership
and third parties may find it difficult to attempt to gain control or influence
the activities of the AIMCO Operating Partnership.
We May Issue Additional Partnership Interests, Diluting OP Unitholders'
Interests. We may issue an unlimited number of additional OP Units or other
limited partner interests of the AIMCO Operating Partnership for such
consideration and on such terms as may be established by the AIMCO GP in its
sole discretion, in most cases, without the approval of OP Unitholders. The
effect of any such issuance may be to dilute the interests of OP Unitholders in
distributions by the AIMCO Operating Partnership.
OP Unitholders May Not Have Limited Liability in Certain Circumstances. The
limitations on the liability of limited partners for the obligations of a
limited partnership have not been clearly established in some states. If it were
determined that the AIMCO Operating Partnership had been conducting business in
any state without compliance with the applicable limited partnership statute, or
that the right or the exercise of the right by the OP Unitholders as a group to
make certain amendments to the AIMCO Operating Partnership Agreement or to take
other action pursuant to the AIMCO Operating Partnership Agreement constituted
participation in the "control" of the AIMCO Operating Partnership's business,
then an OP Unitholder could be held liable under certain circumstances for the
AIMCO Operating Partnership's obligations to the same extent as the AIMCO GP.
Conflicts of Interest and Fiduciary Responsibility. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the AIMCO GP and its affiliates, on the one hand, and the AIMCO
Operating Partnership or any partner thereof, on the other. The directors and
officers of the AIMCO GP have fiduciary duties to manage the AIMCO GP in a
manner beneficial to AIMCO, as the sole stockholder of the AIMCO GP. At the same
time, the AIMCO GP, as general partner, has fiduciary duties to manage the AIMCO
Operating Partnership in a manner beneficial to the AIMCO Operating Partnership
and its partners. The duties of the AIMCO GP, as general partner, to the AIMCO
Operating Partnership and its partners, therefore, may come into conflict with
the duties of the directors and officers of the AIMCO GP to its sole
stockholder, AIMCO. Such conflicts of interest might arise in the following
situations, among others:
- Decisions of the AIMCO GP with respect to the amount and timing of cash
expenditures, borrowings, issuances of additional interests and reserves
in any quarter will affect whether or the extent to which there is
available cash to make distributions in a given quarter.
- Under the terms of its partnership agreement, the AIMCO Operating
Partnership will reimburse the AIMCO GP and its affiliates for costs
incurred in managing and operating the AIMCO Operating Partnership,
including compensation of officers and employees.
- Whenever possible, the AIMCO GP seeks to limit the AIMCO Operating
Partnership's liability under contractual arrangements to all or
particular assets of the AIMCO Operating Partnership, with the other
party thereto to have no recourse against the AIMCO GP or its assets.
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- Any agreements between the AIMCO Operating Partnership and the AIMCO GP
and its affiliates will not grant to the OP Unitholders, separate and
apart from the AIMCO Operating Partnership, the right to enforce the
obligations of the AIMCO GP and such affiliates in favor of the AIMCO
Operating Partnership. Therefore, the AIMCO GP, in its capacity as the
general partner of the AIMCO Operating Partnership, will be primarily
responsible for enforcing such obligations.
- Under the terms of the AIMCO Operating Partnership Agreement, the AIMCO
GP is not restricted from causing the AIMCO Operating Partnership to pay
the AIMCO GP or its affiliates for any services rendered on terms that
are fair and reasonable to the AIMCO Operating Partnership or entering
into additional contractual arrangements with any of such entities on
behalf of the AIMCO Operating Partnership. Neither the AIMCO Operating
Partnership Agreement nor any of the other agreements, contracts and
arrangements between the AIMCO Operating Partnership, on the one hand,
and the AIMCO GP and its affiliates, on the other, are or will be the
result of arms-length negotiations.
Unless otherwise provided for in the relevant partnership agreement,
Delaware law generally requires a general partner of a Delaware limited
partnership to adhere to fiduciary duty standards under which it owes its
limited partners the highest duties of good faith, fairness and loyalty and
which generally prohibit such general partner from taking any action or engaging
in any transaction as to which it has a conflict of interest. The AIMCO
Operating Partnership Agreement expressly authorizes the AIMCO GP to enter into,
on behalf of the AIMCO Operating Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various affiliates of
the AIMCO Operating Partnership and the AIMCO GP, on such terms as the AIMCO GP,
in its sole and absolute discretion, believes are advisable. The latitude given
in the AIMCO Operating Partnership Agreement to the AIMCO GP in resolving
conflicts of interest may significantly limit the ability of an OP Unitholder to
challenge what might otherwise be a breach of fiduciary duty. The AIMCO GP
believes, however, that such latitude is necessary and appropriate to enable it
to serve as the general partner of the AIMCO Operating Partnership without undue
risk of liability.
The AIMCO Operating Partnership Agreement expressly limits the liability of
the AIMCO GP by providing that the AIMCO GP, and its officers and directors will
not be liable or accountable in damages to the AIMCO Operating Partnership, the
limited partners or assignees for errors in judgment or mistakes of fact or law
or of any act or omission if the AIMCO GP or such director or officer acted in
good faith. In addition, the AIMCO Operating Partnership is required to
indemnify the AIMCO GP, its affiliates and their respective officers, directors,
employees and agents to the fullest extent permitted by applicable law, against
any and all losses, claims, damages, liabilities, joint or several, expenses,
judgments, fines and other actions incurred by the AIMCO GP or such other
persons, provided that the AIMCO Operating Partnership will not indemnify for
(i) willful misconduct or a knowing violation of the law or (ii) for any
transaction for which such person received an improper personal benefit in
violation or breach of any provision of the AIMCO Operating Partnership
Agreement.
The provisions of Delaware law that allow the common law fiduciary duties
of a general partner to be modified by a partnership agreement have not been
resolved in a court of law, and the AIMCO GP has not obtained an opinion of
counsel covering the provisions set forth in the AIMCO Operating Partnership
Agreement that purport to waive or restrict the fiduciary duties of the AIMCO GP
that would be in effect under common law were it not for the AIMCO Operating
Partnership Agreement.
Certain Tax Risks Associated with an Investment in the OP Units. For a
general discussion of certain federal income tax consequences resulting from the
acquisition, holding, exchanging, and otherwise disposing of OP Units, see
"Federal Income Taxation of the AIMCO Operating Partnership and OP Unitholders."
Tax Treatment is Dependent on Partnership Status; Publicly Traded
Partnership Risks. The availability to an OP Unitholder of the federal income
tax benefits of an investment in the AIMCO Operating Partnership depends on the
classification of the AIMCO Operating Partnership as a partnership for federal
income tax purposes. In the opinion of our legal counsel, which opinion is based
upon certain assumptions and representations by the AIMCO Operating Partnership
and on opinions of local counsel, with respect to matters of local law, the
AIMCO Operating Partnership will be classified as a partnership for federal
income
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tax purposes. The opinion is expressed as of its date and our counsel has no
obligation to advise OP Unitholders of any subsequent change in the matters
stated, represented or assumed or any subsequent change in the applicable law.
No advance ruling has been or will be sought from the IRS as to the
classification of the AIMCO Operating Partnership as a partnership. An opinion
of counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the status of the AIMCO Operating Partnership as a
partnership.
If a market for the OP Units develops and the OP Units are considered
"readily tradable" on a "secondary market (or the substantial equivalent
thereof)," the AIMCO Operating Partnership would be classified as a publicly
traded partnership. We believe and intend to take the position that the AIMCO
Operating Partnership should not be classified as a publicly traded partnership
because (i) our OP Units are not traded on an established securities market and
(ii) our OP Units should not be considered readily tradable on a secondary
market or the substantial equivalent thereof. The determination of whether
interests in a partnership are readily tradable on a secondary market or the
substantial equivalent thereof, however, depends on various facts and
circumstances (including facts that are not within the control of the AIMCO
Operating Partnership). Although the Treasury regulations promulgated by the
U.S. Treasury Department under the Internal Revenue Code (the "Treasury
Regulations") and an IRS pronouncement provide limited safe harbors, which, if
satisfied, will prevent a partnership's interests from being treated as readily
tradable on a secondary market or the substantial equivalent thereof, the AIMCO
Operating Partnership may not have satisfied any of these safe harbors in its
previous tax years. In addition, because the AIMCO Operating Partnership's
ability to satisfy a safe harbor may involve facts that are not within its
control, it is impossible to predict whether the AIMCO Operating Partnership
will satisfy a safe harbor in future tax years. Such safe harbors are not
intended to be substantive rules for the determination of whether partnership
interests are readily tradable on a secondary market or the substantial
equivalent thereof, and consequently, the failure to meet these safe harbors
will not necessarily cause the AIMCO Operating Partnership to be treated as a
publicly traded partnership. No assurance can be given, however, that the IRS
will not assert that partnerships such as the AIMCO Operating Partnership
constitute publicly traded partnerships, or that facts and circumstances will
not develop which could result in the AIMCO Operating Partnership being treated
as a publicly traded partnership.
If the AIMCO Operating Partnership were characterized as a publicly traded
partnership, it would nevertheless not be taxable as a corporation as long as
90% or more of its gross income consists of "qualifying income." In general,
qualifying income includes interest, dividends, real property rents (as defined
by section 856 of the Internal Revenue Code) and gain from the sale or
disposition of real property. We believe that more than 90% of the gross income
of the AIMCO Operating Partnership consists of qualifying income and we expect
that more than 90% of its gross income in future tax years will consist of
qualifying income. In such event, even if the AIMCO Operating Partnership were
characterized as a publicly traded partnership, it would not be taxable as a
corporation. If the AIMCO Operating Partnership were characterized as a publicly
traded partnership, however, each OP Unitholder would be subject to special
rules under section 469 of the Internal Revenue Code. See "Federal Income
Taxation of the AIMCO Operating Partnership and OP Unitholders -- Limitations on
Deductibility of Losses; "Passive Activity Loss" Limitation." No assurance can
be given that the actual results of the AIMCO Operating Partnership's operations
for any one taxable year will enable it to satisfy the qualifying income
exception.
If the AIMCO Operating Partnership were characterized as an association or
publicly traded partnership taxable as a corporation (because it did not meet
the qualifying income exception discussed above), it would be subject to tax at
the entity level as a regular corporation and OP Unitholders would be subject to
tax in the same manner as stockholders of a corporation. Thus, the AIMCO
Operating Partnership would be subject to federal tax (and possibly state and
local taxes) on its net income, determined without reduction for any
distributions made to the OP Unitholders, at regular federal corporate income
tax rates, thereby reducing the amount of any cash available for distribution to
the OP Unitholders, which reduction could also materially and adversely impact
the liquidity and value of the OP Units. In addition, the AIMCO Operating
Partnership's items of income, gain, loss, deduction and credit would not be
passed through to the OP Unitholders and the OP Unitholders would not be subject
to tax on the income earned by the AIMCO Operating Partnership.
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Distributions received by an OP Unitholder from the AIMCO Operating Partnership,
however, would be treated as dividend income for federal income tax purposes,
subject to tax as ordinary income to the extent of current and accumulated
earnings and profits of the AIMCO Operating Partnership, and the excess, if any,
as a nontaxable return of capital to the extent of the OP Unitholder's adjusted
tax basis in his AIMCO Operating Partnership interest (without taking into
account partnership liabilities), and thereafter as gain from the sale of a
capital asset. Characterization of the AIMCO Operating Partnership as an
association or publicly traded partnership taxable as a corporation would also
result in the termination of AIMCO's status as a REIT for federal income tax
purposes which would have a material adverse impact on AIMCO. See "Federal
Income Taxation of the AIMCO Operating Partnership and OP
Unitholders -- Partnership Status." No assurances can be given that the IRS
would not challenge the status of the AIMCO Operating Partnership as a
"partnership" which is not "publicly traded" for federal income tax purposes or
that a court would not reach a result contrary to such positions. Accordingly,
each prospective investor is urged to consult his tax advisor regarding the
classification and treatment of the AIMCO Operating Partnership as a
"partnership" for federal income tax purposes.
Consequences of Exchanging Property for OP Units. In general, no gain or
loss will be recognized for federal income tax purposes by a person contributing
property to the AIMCO Operating Partnership (the "Contributing Partner") in
exchange for OP Units, and the Contributing Partner will take a tax basis in the
OP Unit received equal to his adjusted tax basis in the contributed property.
Notwithstanding this general rule of nonrecognition, a Contributing Partner may
recognize a gain where the property transferred is subject to liabilities, or
the AIMCO Operating Partnership assumes liabilities in connection with the
transfer of property, and the amount of such liabilities exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to such person as
determined immediately after the transfer. Such excess is treated as a deemed
distribution of cash to the Contributing Partner from the AIMCO Operating
Partnership which, in turn, is treated as a nontaxable return of capital to the
extent of the Contributing Partner's adjusted tax basis in his OP Unit and
thereafter as gain from the sale of such partnership interest. If the
Contributing Partner transfers property to the AIMCO Operating Partnership and
the adjusted tax basis of the property differs from its fair market value, then
AIMCO Operating Partnership tax items must be allocated, for federal income tax
purposes, in a manner such that the Contributing Partner is charged with the
unrealized gain, or benefits from the unrealized loss, associated with the
property at the time of the contribution. See "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- Tax Consequences Upon
Contribution of Property to the AIMCO Operating Partnership."
There are a variety of transactions that the AIMCO Operating Partnership
may in its sole discretion undertake following such contribution with respect to
the contributed property or the debt securing such property which could cause
the Contributing Partner to recognize taxable gain, even though little or no
cash is distributable to him as a result thereof. Such transactions include but
are not limited to (i) the sale of a particular property, which could result in
an allocation of gain only to those OP Unitholders who received OP Units for
such property (even if cash attributable to sale proceeds were distributed
proportionately to all OP Unitholders); and (ii) a reduction in the nonrecourse
debt allocable to property (either because such debt becomes a recourse
liability or is paid off with cash flow, new equity, or proceeds of debt secured
by other property of the AIMCO Operating Partnership), which would result in a
deemed distribution of money to the OP Unitholders who received OP Units for
such property as well as to the other OP Unitholders. See "Federal Income
Taxation of the AIMCO Operating Partnership and OP Unitholders -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
and "Federal Income Taxation of the AIMCO Operating Partnership and OP
Unitholders -- Cash Distributions." The AIMCO Operating Partnership Agreement
grants the AIMCO GP broad authority to undertake such transactions and does not
grant the OP Unitholders affected by these actions any rights to prevent the
AIMCO GP from taking such actions. Even if the AIMCO GP does not intend to sell
or otherwise dispose of contributed property or to reduce the debt, if any,
securing such property within any specified time period after the Contributing
Partner transfers such property to the AIMCO Operating Partnership, it is
possible that future economic, market, legal, tax or other considerations may
cause the AIMCO Operating Partnership to dispose of the contributed property or
to reduce its debt. In this regard, the AIMCO Operating Partnership Agreement
provides that the AIMCO GP, while acting in its capacity as general partner of
the AIMCO Operating Partnership, may, but is not required
12
<PAGE> 18
to, take into account the tax consequences to the OP Unitholders of its actions
in such capacity. The AIMCO GP intends to make decisions in its capacity as
general partner of the AIMCO Operating Partnership so as to maximize the
profitability of the AIMCO Operating Partnership as a whole, independent of the
tax effects on individual OP Unitholders.
Tax Liability Exceeding Cash Distribution. An OP Unitholder will be
required to pay federal income tax and, in certain cases, state and local income
taxes, on his allocable share of the AIMCO Operating Partnership's income, even
if he receives no cash distributions from the AIMCO Operating Partnership. No
assurance can be given that an OP Unitholder will receive cash distributions
equal to his allocable share of taxable income from the AIMCO Operating
Partnership or even the tax liability to him resulting from that income.
Further, upon the sale of his OP Units, an OP Unitholder may incur a tax
liability in excess of the amount of cash received. See "Federal Income Taxation
of the AIMCO Operating Partnership and OP Unitholders -- Taxation of OP
Unitholders of AIMCO Operating Partnership," and "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- Sale, Redemption, or Exchange
of OP Units."
Deductibility of Losses. An OP Unitholder's ability to use his allocable
share of losses, if any, from the AIMCO Operating Partnership at the end of the
taxable year in which the loss is incurred may be limited by certain provisions
of the Internal Revenue Code. See "Federal Income Taxation of the AIMCO
Operating Partnership and OP Unitholders -- Limitations on Deductibility of
Losses."
Potential Audits. The AIMCO Operating Partnership's tax return may be
audited, and any such audit could result in an audit of an OP Unitholder's tax
return as well as increased liabilities for taxes because of adjustments
resulting from the audit. No assurance can be given that the AIMCO Operating
Partnership will not be audited by the IRS or various state authorities or that
tax adjustments will not be made. Any adjustments in the AIMCO Operating
Partnership's tax return will lead to adjustments in an OP Unitholder's tax
return and may lead to audits of an OP Unitholder's tax return and adjustments
of items unrelated to the AIMCO Operating Partnership. Each OP Unitholder would
bear the cost of any expenses incurred in connection with an examination of such
OP Unitholder's tax return. See "Federal Income Taxation of the AIMCO Operating
Partnership and OP Unitholders -- Information Returns and Audit Procedures."
State, Local and Other Tax Considerations. In addition to federal income
taxes, the AIMCO Operating Partnership and its OP Unitholders may be subject to
state, local and foreign taxation in various jurisdictions in which the AIMCO
Operating Partnership does business, owns property or resides. See "Other Tax
Consequences -- State, Local and Foreign Taxes."
Tax Gain or Loss on Disposition of OP Units. An OP Unitholder who sells OP
Units will recognize gain or loss equal to the difference between the amount
realized (including his share of AIMCO Operating Partnership nonrecourse
liabilities) and his adjusted tax basis in such OP Units. Thus, prior AIMCO
Operating Partnership distributions in excess of cumulative net taxable income
in respect of an OP Unit which decreased an OP Unitholder's tax basis in such OP
Unit will, in effect, become taxable income if the OP Unit is sold at a price
greater than the OP Unitholder's tax basis in such OP Units, even if the price
is less than his original cost. A portion of the amount realized (whether or not
representing gain) may be ordinary income.
13
<PAGE> 19
SECURITIES COVERED BY THIS PROSPECTUS
The securities covered by this Prospectus (the "Securities") may be offered
and issued from time to time by AIMCO or the AIMCO Operating Partnership in
connection with acquisitions of businesses, properties, securities or other
assets. In addition, AIMCO may issue (i) shares of its Class A Common Stock, par
value $0.01 per share ("Class A Common Stock") covered hereby upon conversion of
shares its Preferred Stock, par value $0.01 per share ("Preferred Stock"), (ii)
shares of its Preferred Stock covered hereby and shares of its Class A Common
Stock covered hereby, in each case in exchange for Partnership Preferred Units
of the AIMCO Operating Partnership ("Preferred OP Units") tendered for
redemption pursuant to the AIMCO Operating Partnership Agreement and (iii)
shares of its Class A Common Stock covered hereby in exchange for Partnership
Common Units of the AIMCO Operating Partnership ("Common OP Units" and together
with the Preferred OP Units, the "OP Units") tendered for redemption pursuant to
the AIMCO Operating Partnership Agreement.
It is expected that the terms of acquisitions involving the issuance of the
Securities will be determined by direct negotiations with owners or controlling
persons of the business, properties, securities or other assets to be acquired
or through exchange offers. It is expected that any shares of Class A Common
Stock or Common OP Units issued will be valued at prices based on or related to
market prices for the Class A Common Stock at or near the time the terms of such
acquisition are established or at or near the time such Securities are
delivered, or based on average market prices for periods ending at or near such
times. No underwriting discounts or commissions will be paid, although brokers'
or finders' fees may be paid from time to time with respect to specific
acquisitions, and AIMCO or the AIMCO Operating Partnership may issue the
Securities in full or partial payment of such fees. Any person receiving such
fees may be deemed to be an "underwriter," within the meaning of the Securities
Act.
This Prospectus has also been prepared for use by the persons who may
receive from AIMCO or the AIMCO Operating Partnership Securities covered by the
Registration Statement in acquisitions and who may be entitled to offer such
Securities under circumstances requiring the use of a Prospectus (such persons
being referred to under this caption as "Securityholders"); provided, however,
that no Securityholder will be authorized to use this Prospectus for any offer
of such Security without first obtaining the consent of AIMCO and the AIMCO
Operating Partnership. AIMCO and the AIMCO Operating Partnership may consent to
the use of this Prospectus for a limited period of time by the Securityholders
and subject to limitations and conditions which may be varied by agreement
between AIMCO and the AIMCO Operating Partnership and the Securityholders.
Resales of such Securities may be made on the NYSE or such other exchange on
which the Securities may be listed, in the over-the-counter market, in private
transactions or pursuant to underwriting agreements.
Agreements with Securityholders permitting use of this Prospectus may
provide that any such offering be effected in an orderly manner through
securities dealers, acting as broker or dealer, selected by AIMCO and the AIMCO
Operating Partnership; that Securityholders enter into custody agreements with
one or more banks with respect to such shares; and that sales be made only by
one or more of the methods described in this Prospectus, as appropriately
supplemented or amended when required. The Securityholders may be deemed to be
underwriters within the meaning of the Securities Act.
When resales are to be made through a broker or dealer selected by AIMCO
and the AIMCO Operating Partnership, it is anticipated that a member firm of the
NYSE may be engaged to act as the Securityholders' agent in the sale of shares
by such Securityholders. The member firm will be entitled to commissions
(including negotiated commissions to the extent permissible). Sales of shares by
the member firm may be made on the NYSE or other exchange from time to time at
prices related to prices then prevailing. Any such sales may be by block trade.
Any such member firm may be deemed to be an underwriter within the meaning of
the Securities Act and any commissions earned by such member firm may be deemed
to be underwriting discounts and commissions under such act.
Upon AIMCO and the AIMCO Operating Partnership being notified by a
Securityholder that any block trade has taken place, a supplementary prospectus,
if required, will be filed pursuant to Rule 424 under the Securities Act,
disclosing the name of the member firm, the number of shares involved, the price
at which
14
<PAGE> 20
such shares were sold by such Securityholder, and the commissions to be paid by
such Securityholder to such member firm.
This Prospectus may be supplemented or amended from time to time to reflect
its use for resales by persons who received Securities for whom AIMCO and the
AIMCO Operating Partnership have consented to the use of this Prospectus in
connection with resales of such Securities.
In addition to the Securities offered hereby, AIMCO and the AIMCO Operating
Partnership may from time to time issue additional Securities through public
offerings or private placements. AIMCO and the AIMCO Operating Partnership may
make such future issuances of Securities in connection with its acquisition of
other businesses, properties, securities or other assets in business combination
transactions or for other purposes.
15
<PAGE> 21
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
COMPANY COMPANY
THE COMPANY PREDECESSORS(1) PRO FORMA(6)
------------------------------------------------ ------------------- -------------------
FOR THE SIX FOR THE FOR THE FOR THE
MONTHS FOR THE YEARS PERIOD PERIOD FOR THE SIX FOR THE
ENDED ENDED JAN. 10, JAN. 1, YEAR MONTHS YEAR
JUNE 30, DECEMBER 31, 1994 TO 1994 TO ENDED ENDED ENDED
------------- --------------------- DEC. 31, JULY 28, DEC. 31, JUNE 30, DEC. 31,
1998 1997 1997 1996 1995 1994 1994(3) 1993 1998 1997
----- ----- ----- ----- ----- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earning to fixed
charges(2)....................... 2.0:1 1.6:1 2.3:1 1.6:1 2.1:1 5.8:1 N/A 1.2:1 1.6:1 2.0:1
Ratio of earnings to combined fixed
charges and preferred stock
dividends(4)(5).................. 1.6:1 1.6:1 2.2:1 1.6:1 1.5:1 2.0:1 N/A 1.2:1 1.3:1 1.5:1
</TABLE>
- ---------------
(1) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of Class A Common Stock. On such date, AIMCO and Property Asset
Management, L.L.C., and its affiliated companies and PDI Realty Enterprises,
Inc. (collectively, the "Company Predecessors") engaged in a business
combination and consummated a series of related transactions which enabled
the Company to continue and to expand the property management and related
businesses of the Company Predecessors.
(2) The ratio of earnings to fixed charges for the Company was computed by
dividing earnings by fixed charges. For this purpose, "earnings" consists of
income before minority interests (which includes equity in earnings of
unconsolidated subsidiaries and partnerships only to the extent of dividends
and distributions received) plus fixed charges (other than any interest
which has been capitalized); and "fixed charges" consists of interest
expense (including amortization of loan costs) and interest which has been
capitalized. The ratio of earnings to fixed charges for the Company
Predecessors was computed by dividing earnings by fixed charges. For this
purpose, "earnings" consists of income (loss) before extraordinary items and
income taxes plus fixed charges and "fixed charges" consists of interest
expense (including amortization of loan costs).
(3) The earnings of the Company Predecessors for the period from January 1, 1994
to July 28, 1994 were inadequate to cover fixed charges by $1,463,000.
(4) The ratio of earnings to combined fixed charges and preferred stock
dividends for the Company was computed by dividing earnings by the total of
fixed charges and preferred stock dividends. For this purpose, "earnings"
consists of income before minority interests (which includes equity in
earnings of unconsolidated subsidiaries and partnerships only to the extent
of dividends and distributions received) plus fixed charges (other than any
interest which has been capitalized); "fixed charges" consists of interest
expense (including amortization of loan costs) and interest which has been
capitalized; and "preferred stock dividends" consists of the amount of
pre-tax earnings that would be required to cover preferred stock dividend
requirements.
(5) The Company Predecessors did not have any shares of preferred stock
outstanding during the period from January 1, 1993 through July 28, 1994.
(6) Gives pro forma effect, as of the beginning of the period indicated, to
AIMCO's May 8, 1998 merger with Ambassador Apartments, Inc., AIMCO's October
1, 1998 merger with Insignia Financial Group, Inc. and certain other
transactions completed by AIMCO subsequent to December 31, 1997.
16
<PAGE> 22
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial and operating
information for the Company. The Selected Historical Financial Data for the six
months ended June 30, 1998 and 1997 is based on unaudited financial statements
of AIMCO as included in AIMCO's Quarterly Report on Form 10-Q for the six months
ended June 30, 1998, incorporated by reference herein. Results for the quarter
ended June 30, 1998 are not necessarily indicative of the results to be expected
for a full year. The selected historical financial information for the years
ended December 31, 1997, 1996 and 1995 is based on the audited financial
statements of AIMCO incorporated by reference herein. The selected historical
financial information for the period January 10, 1994 (the date of AIMCO's
inception) through December 31, 1994 for AIMCO and for the period from January
1, 1994 through July 28, 1994 and for the year ended December 31, 1993 for the
Company's Predecessors is based on the audited financial statements of AIMCO and
the Company's Predecessors, respectively. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" set forth in AIMCO's Annual Report on Form
10-K/A for the year ended December 31, 1997 and in AIMCO's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and the historical financial
statements of AIMCO and notes thereto incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
THE COMPANY'S
THE COMPANY PREDECESSORS(a)
-------------------------------------------------------------------------- ------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE FOR THE JAN. 10, JAN. 1, FOR THE
SIX MONTHS ENDED YEAR ENDED 1994 1994 YEAR
JUNE 30, DECEMBER 31, THROUGH THROUGH ENDED
----------------------- -------------------------------- DEC. 31, JULY 28, DEC. 31,
1998 1997 1997 1996 1995 1994 1994(b) 1993
---------- ---------- ---------- -------- -------- ------------- ------------- --------
(RESTATED)(c) (RESTATED)(c)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY
OPERATIONS:
Rental and other property
revenues................ $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894 $ 5,805 $ 8,056
Property operating
expenses................ (59,643) (31,106) (76,168) (38,400) (30,150) (10,330) (2,263) (3,200)
Owned property management
expenses................ (4,713) (2,734) (6,620) (2,746) (2,276) (711) -- --
Depreciation.............. (34,289) (15,046) (37,741) (19,556) (15,038) (4,727) (1,151) (1,702)
---------- ---------- ---------- -------- -------- -------- ------- --------
Income from Rental
Property Operations..... 62,619 30,779 72,477 39,814 27,483 9,126 2,391 3,154
---------- ---------- ---------- -------- -------- -------- ------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income.................. 9,562 5,605 13,937 8,367 8,132 3,217 6,533 8,069
Management and other
expenses................ (5,470) (2,643) (9,910) (5,352) (4,953) (2,047) (5,823) (6,414)
Corporate overhead
allocation.............. (196) (294) (588) (590) (581) -- -- --
Amortization of
Goodwill................ -- -- (948) (500) (428) -- -- --
Owner and seller
bonuses................. -- -- -- -- -- -- (204) (468)
Depreciation and
amortization............ (3) (161) (453) (218) (168) (150) (146) (204)
---------- ---------- ---------- -------- -------- -------- ------- --------
Income from service
business................ 3,893 2,507 2,038 1,707 2,002 1,020 360 983
Minority interests in
service company
business................ (1) (2) (10) 10 (29) (14) -- --
---------- ---------- ---------- -------- -------- -------- ------- --------
Company's shares of income
from service company
business................ 3,892 2,505 2,028 1,717 1,973 1,006 360 983
---------- ---------- ---------- -------- -------- -------- ------- --------
General and administrative
expenses................ (4,103) (784) (5,396) (1,512) (1,804) (977) -- --
Interest income........... 11,350 1,341 8,676 523 658 123 -- --
Interest expense.......... (34,778) (20,604) (51,385) (24,802) (13,322) (1,576) (4,214) (3,510)
Minority interest in other
partnerships............ (516) (565) 1,008 (111) -- -- -- --
Equity in earnings of
other partnerships(d)... (4,681) (379) (1,798) -- -- -- -- --
Equity in earnings of
Unconsolidated
Subsidiaries(e)......... 5,609 (86) 4,636 -- -- -- -- --
Amortization of
Goodwill................ (3,394) (474) -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------- ------- --------
Income (loss) before gain
on disposition of
property, extraordinary
item, income taxes and
minority interest in
AIMCO Operating
Partnership............. 35,998 11,733 30,246 15,629 14,988 7,702 (1,463) 627
---------- ---------- ---------- -------- -------- -------- ------- --------
Gain on disposition of
property................ 2,526 -- 2,720 44 -- -- -- --
Extraordinary (loss) --
forgiveness of debt..... -- (269) (269) -- -- -- -- --
Provisions for income
taxes................... -- -- -- -- -- -- (36) (336)
---------- ---------- ---------- -------- -------- -------- ------- --------
Income (loss) before
minority interest in
AIMCO Operating
Partnership............. 38,524 11,464 32,697 15,673 14,988 7,702 (1,499) 291
Minority interest in AIMCO
Operating Partnership... (3,262) (1,616) (4,064) (2,689) (1,613) (599) -- --
---------- ---------- ---------- -------- -------- -------- ------- --------
Net income (loss)......... $ 35,262 $ 9,848 $ 28,633 $ 12,984 $ 13,375 $ 7,143 $(1,499) $ 291
========== ========== ========== ======== ======== ======== ======= ========
</TABLE>
17
<PAGE> 23
<TABLE>
<CAPTION>
THE COMPANY'S
THE COMPANY PREDECESSORS(a)
-------------------------------------------------------------------------- ------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE FOR THE JAN. 10, JAN. 1, FOR THE
SIX MONTHS ENDED YEAR ENDED 1994 1994 YEAR
JUNE 30, DECEMBER 31, THROUGH THROUGH ENDED
----------------------- -------------------------------- DEC. 31, JULY 28, DEC. 31,
1998 1997 1997 1996 1995 1994 1994(b) 1993
---------- ---------- ---------- -------- -------- ------------- ------------- --------
(RESTATED)(c) (RESTATED)(c)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF
PERIOD):
Real Estate, before
accumulated
depreciation............ $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $406,067 $47,500 $ 46,819
Real Estate, net of
accumulated
depreciation............ 2,287,309 945,969 1,503,922 745,145 448,425 392,368 32,270 33,701
Total assets.............. 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361 39,042 38,914
Total mortgages and notes
payable................. 1,314,475 644,457 808,503 522,146 268,692 141,315 40,873 41,893
Mandatory redeemable 1994
Cumulative Convertible
Senior Preferred
Stock................... -- -- -- -- -- 96,600 -- --
Stockholder's equity...... 1,394,394 388,477 1,045,300 215,749 169,032 140,319 (9,345) (7,556)
OTHER DATA:
Total owned properties
(end of period)......... 210 107 147 94 56 48 4 4
Total owned apartment
units (end of period)... 58,345 27,056 40,039 23,764 14,453 12,513 1,711 1,711
Equity Owned Properties... 74,318 88,690 83,431 -- -- -- -- --
Units under management
(end of
period)................. 68,248 70,213 69,587 19,045 19,594 20,758 29,343 28,422
Basic earnings per common
share................... $ 0.62 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42 N/A N/A
Diluted earnings per
common share............ $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42 N/A N/A
Distributions paid per
common share............ $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29 N/A N/A
Cash flows provided by
operating activities.... 5,838 25,035 73,032 38,806 25,911 16,825 2,678 2,203
Cash flows used in
investing activities.... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481) (924) (16,352)
Cash flows provided by
(used in) financing
activities.............. 107,063 91,450 668,549 60,129 30,145 176,800 (1,032) 14,114
Funds from
operations(f)........... $ 83,657 $ 28,441 $ 81,155 $ 35,185 $ 25,285 $ 9,391 N/A N/A
Weighted average number of
common shares and OP
Units outstanding(g).... 43,409 18,559 29,119 14,994 11,461 10,920 N/A N/A
</TABLE>
- ---------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of Class A Common Stock and issued 966,000 shares of convertible
preferred stock and 513,514 unregistered shares of Class A Common Stock. On
such date, the Company and the Company Predecessors engaged in a business
combination and consummated a series of related transactions which enabled
the Company to continue and expand the property management and related
businesses of the Company Predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of Class A Common Stock were repurchased
by AIMCO in 1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO.
(c) In the second quarter of 1996, the Company reorganized its ownership of the
service company business. Prior to the 1996 reorganization, the Company
reported the service company business on the equity method. After the 1996
reorganization, the service company business was conducted by a limited
partnership controlled by the Company and was, therefore, consolidated. The
Company has restated the balance sheet as of December 31, 1995 and 1994,
and the statements of income and statements of cash flows for the year
ended December 31, 1995 and the period from January 10, 1994 through
December 31, 1994 to reflect the change. The restatement has no impact on
net income, but does increase third party and affiliate management and
other income, management and other expenses, amortization of management
company goodwill and depreciation of non-real estate assets. In the third
quarter of 1998, the Company reorganized its ownership of the service
company business so that it is now conducted by the management companies,
which are not consolidated.
(d) Represents the Company's share of earnings from 83,431 units in which the
Company purchased an equity interest from the NHP Real Estate Companies.
(e) Represents the Company's equity earnings in the unconsolidated
subsidiaries.
(f) The Company's management believes that the presentation of funds from
operations ("FFO"), when considered with the financial data determined in
accordance with generally accepted accounting principles ("GAAP"), provides
a useful measure of the Company's performance. However, FFO does not
represent cash flow and is not necessarily indicative of cash flow or
liquidity available to the Company, nor should it be considered as an
alternative to net income as an indicator of operating performance. The
Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT") defines FFO as net income (loss), computed in accordance
with GAAP, excluding gains and losses from debt restructuring and sales of
property, plus real estate related depreciation and amortization
18
<PAGE> 24
(excluding amortization of financing costs), and after adjustments for
unconsolidated partnerships and joint ventures. AIMCO calculates FFO
consistent with the NAREIT definition, adjusted for AIMCO's minority
interest in the AIMCO Operating Partnership, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. The Company's management believes
that presentation of FFO provides investors with industry-accepted
measurements which help facilitate an understanding of the Company's
ability to make required dividend payments, capital expenditures and
principal payments on its debt. There can be no assurance that AIMCO's
basis of computing FFO is comparable with that of other REITs.
The following is a reconciliation of income before minority interest in the
AIMCO Operating Partnership to FFO:
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS FOR THE PERIOD
ENDED YEAR ENDED JANUARY 10,
JUNE 30, DECEMBER 31, 1994 TO
----------------- --------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
------- ------- ------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income before minority interest in
AIMCO
Operating Partnership.............. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property.... (2,526) -- (2,720) (44) -- --
Extraordinary item................. -- 269 269 -- -- --
Real estate depreciation, net of
minority interests............... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill........... 4,727 474 948 500 428 76
Equity in earnings of
Unconsolidated Subsidiaries:
Real estate depreciation......... -- 1,263 3,584 -- -- --
Amortization of management
contracts..................... 3,088 150 1,587 -- -- --
Deferred taxes................... 4,291 874 4,894 -- -- --
Equity in earnings of other
partnerships:
Real estate depreciation......... 9,131 697 6,280 -- -- --
Preferred stock dividends.......... (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations.............. $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
(g) Generally, after a one-year holding period, Common OP Units may be tendered
for redemption at the option of the holder and, upon tender, may be
acquired by AIMCO for shares of Class A Common Stock at an exchange ratio
of one share of Class A Common Stock for each Common OP Unit (subject to
adjustment).
19
<PAGE> 25
PER SHARE AND PER UNIT DATA
PER SHARE DATA
Set forth below are historical earnings per share of Class A Common Stock,
cash dividends per share of Class A Common Stock and book value per share of
Class A Common Stock data of AIMCO. The data set forth below should be read in
conjunction with the AIMCO audited financial statements and unaudited interim
financial statements, including the notes thereto, which are incorporated by
reference herein.
<TABLE>
<CAPTION>
AIMCO
-------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Basic earnings per weighted average share of Class A Common
Stock outstanding......................................... $ 0.62 $ 1.09
Diluted earnings per weighted average share of Class A
Common Stock outstanding.................................. $ 0.61 $ 1.08
Cash dividends per weighted average share of Class A Common
Stock outstanding......................................... $1.125 $ 1.85
Book value per share of Class A Common Stock outstanding.... $24.01 $22.51
</TABLE>
PER UNIT DATA
Set forth below are historical earnings per Common OP Unit, cash
distributions per Common OP Unit and book value per Common OP Unit. The data set
forth below should be read in conjunction with the AIMCO Operating Partnership
audited financial statements and unaudited interim financial statements,
including the notes thereto, which are incorporated by reference herein.
<TABLE>
<CAPTION>
AIMCO OPERATING PARTNERSHIP
----------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Basic earnings per weighted average Common OP Unit
outstanding............................................... $ 0.61 $ 1.09
Diluted earnings per weighted average Common OP Unit
outstanding............................................... $ 0.61 $ 1.08
Cash distributions per Common OP Unit outstanding........... $1.125 $ 1.85
Book value per Common OP Unit outstanding................... $23.47 $22.33
</TABLE>
20
<PAGE> 26
STOCK PRICES, DIVIDENDS AND DISTRIBUTIONS
The Class A Common Stock is listed and traded on the NYSE under the symbol
"AIV." The following table sets forth, for the periods indicated, the high and
low reported sales prices per share of Class A Common Stock, as reported on the
NYSE Composite Tape, dividends per share declared on Class A Common Stock for
the same periods, and distributions per unit declared on Common OP Units for the
same periods. Common OP Units are subject to restrictions on transfer, and there
is no trading market for the Common OP Units.
<TABLE>
<CAPTION>
COMMON
CLASS A COMMON STOCK OP UNITS
-------------------------- ------------
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- ---- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)................................... $37 1/8 $30 $ -- $ --
Third Quarter.............................. 41 30 15/16 0.5625 0.5625
Second Quarter............................. 38 7/8 36 1/2 0.5625 0.5625
First Quarter.............................. 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter............................. 38 32 0.5625 0.5625
Third Quarter.............................. 36 3/16 28 1/8 0.4625 0.4625
Second Quarter............................. 29 3/4 26 0.4625 0.4625
First Quarter.............................. 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter............................. 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.............................. 22 18 3/8 0.4250 0.4250
Second Quarter............................. 21 18 3/8 0.4250 0.4250
First Quarter.............................. 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Because AIMCO has elected to be taxed for federal income tax purposes as a
REIT, it is required to distribute annually to its stockholders at least 95% of
its "REIT taxable income," which, as defined by the Code and the Treasury
Regulations, is generally equivalent to net taxable ordinary income. AIMCO
measures its economic profitability and pays regular dividends to its
stockholders based on its operating results during the relevant period. The
future payment of dividends by AIMCO will be at the discretion of the AIMCO
Board of Directors and will depend on numerous factors, including financial
condition, capital requirements, the annual distribution requirements under the
provisions of the Code applicable to REITs and such other factors the AIMCO
Board of Directors deems relevant. See "Business of the Company -- Operating and
Financial Strategies; Dividend Policy."
On January 22, 1998, the AIMCO Board of Directors voted to increase the
annual dividend rate on the Class A Common Stock to $2.25 per share. Such
dividend increase was effective commencing with the dividend with respect to the
fourth quarter of 1997 paid on February 13, 1998 and is subject to the factors
described above, including AIMCO's future results of operations. Historically,
the AIMCO Operating Partnership has made quarterly distributions to holders of
Common OP Units (on a per unit basis) that are equal to the dividends paid on
the Class A Common Stock (on a per share basis). Although this is expected to be
true in the future, there can be no assurance that distributions on the Common
OP Units will always be equal to the dividends on the Class A Common Stock. See
"Risk Factors -- Risks Associated With an Investment in OP Units."
21
<PAGE> 27
BUSINESS OF THE COMPANY
The Company is engaged in the ownership, acquisition, development,
expansion and management of multi-family apartment properties. As of October 1,
1998, the Company owned or managed 396,090 apartment units in 2,303 properties
located in 49 states, the District of Columbia and Puerto Rico. Based on
apartment unit data compiled as of January 1, 1998 by the National Multi Housing
Council, we believe that, as of October 1, 1998, we were the largest owner and
manager of multifamily apartment properties in the United States. The "AIMCO
Properties" include:
- "Owned Properties" -- properties that the Company owns or controls;
- "Equity Properties" -- properties in which the Company owns a
non-controlling (usually less than 30%) interest; and
- "Managed Properties" -- properties that the Company manages for third
parties and affiliates.
As of October 1, 1998, the Company had 209 Owned Properties with 58,495
units, 1,335 Equity Properties with 239,789 units and 759 Managed Properties
with 97,716 units. The Company manages all of the Owned Properties, a majority
of the Equity Properties and all of the Managed Properties.
OPERATING AND FINANCIAL STRATEGIES
The Company uses the following operating and financing strategies to
attempt to meet its objective of providing long-term, predictable FFO per share
(certain terms used herein are defined below in "-- Accounting Policies and
Definitions"):
- Acquisition of Properties at Less Than Replacement Cost. The Company
attempts to acquire properties at a significant discount to their
replacement cost, which the Company believes will provide it with a
competitive cost advantage in comparison to newly constructed properties.
- Geographic Diversification. The Company operates in 49 states, the
District of Columbia and Puerto Rico. This geographic diversification
insulates the Company, to some degree, from inevitable downturns in any
one market. Among Owned Properties and Equity Properties, Houston, Texas,
the Company's largest single regional market, and Dallas, Texas, the
Company's second largest regional market, accounted for approximately
13.9% and 8.0%, respectively, of the properties in which the Company has
an ownership interest, on a pro rata basis.
- Market Growth. The Company seeks to operate in markets where population
and employment growth are expected to exceed the national average and
where it believes it can become a regionally significant owner or manager
of properties. The average annual population and employment growth rates
from 1990 to 1995 in The Company's five largest regional markets were
2.3% and 2.6%, respectively, compared to national averages of 1.1% and
1.7%, respectively. For the 1996 to 1999 period, average annual
population and employment growth rates in The Company's five largest
regional markets are forecasted to be 2.2% and 3.6%, respectively,
compared with projected national averages of 0.9% and 2.0%, respectively.
- Product Diversification. The Company's portfolio of apartment properties
also span a range of apartment community types, both within and among
markets. The Company's properties are located in both urban and suburban
areas and range from garden apartments to high rises and from luxury
townhomes to affordable properties.
- Capital Replacement. The Company believes that the physical condition and
amenities of its apartment communities are important factors in its
ability to maintain and increase rental rates. The Company also believes
that a program of regular maintenance of the quality of its apartments,
rather than episodic renovation, contributes to the reliability of
earnings per share. The Company presently allocates approximately $300
annually per owned apartment unit for Capital Replacements and reserves
unexpended amounts for future Capital Replacements. From time to time,
the Company reevaluates its Capital Replacement requirements and updates
the amount of its budgeted Capital
22
<PAGE> 28
Replacements per owned apartment unit accordingly. For the six months
ended June 30, 1998, the Company charged approximately $6.6 million for
Capital Replacements to its reserve, and spent approximately $13.5
million, and had aggregate cumulative unexpended Capital Replacement
reserves of approximately $2.4 million at June 30, 1998.
- Debt Financing. The Company's strategy is generally to incur debt to
increase its return on equity while maintaining acceptable interest
coverage ratios. The Company seeks to match debt maturities to the
character of the assets financed. Accordingly, the Company uses
predominantly long-term, fixed-rate and self-amortizing debt in order to
avoid the refunding or repricing risks of short-term borrowings. The
Company also uses short-term debt financing to fund acquisitions and
generally expects to refinance such borrowings with proceeds from equity
offerings or long-term debt financings. As of June 30, 1998,
approximately 6% of the Company's outstanding debt was short-term debt
and 94% was long-term debt.
- Dispositions. From time to time, the Company sells properties that do not
meet its return on investment criteria or that are located in areas where
the Company does not believe that the long-term real estate values
justify the continued investment in the properties. Three properties in
Houston and one property in each of Dallas and Phoenix were sold in
October 1997. The Company recognized a net gain of approximately $2.8
million on the sales.
In January 1998, the Company sold the Sun Valley Apartments, an
apartment community containing 430 apartment units located in Salt Lake
City, Utah, for $11.5 million, less selling costs of $0.3 million. The
Company recognized a $3.3 million gain on the sale. Cash proceeds from
the sale were used to repay a portion of the AIMCO Operating
Partnership's outstanding short-term indebtedness.
In September 1998, the Company sold the Rillito Village Apartments,
an apartment community containing 272 apartments units located in Tucson,
Arizona, for $6.8 million. The Company recognized a gain on the sale of
approximately $75,000 and used the cash proceeds to pay down a portion of
the outstanding balance on the Credit Facilities and to pay closing
costs.
- Dividend Policy. The Company pays dividends and distributions to share
its profitability with its stockholders and limited partners. For the
years ended December 31, 1997, 1996 and 1995, AIMCO distributed 66.5%,
72.3% and 75.1% of FFO to its stockholders. Amounts not distributed are
available for reinvestment, stock repurchases, amortization of debt and
provide a margin to insulate annual dividends from fluctuations in the
Company's business. AIMCO's dividend for 1997 was $1.85 per share. It is
the present policy of AIMCO to increase the dividend annually in an
amount equal to one-half the rate of the projected increase in FFO,
adjusted for capital replacements. In January 1998, AIMCO increased its
dividend to $0.5625 per share per quarter, commencing with the February
13, 1998 dividend payment which is equivalent to an annualized dividend
of $2.25 per share of Class A Common Stock. The minimum annual
distribution requirement for REITs, which require the distribution of
approximately 95% of "REIT taxable income" (see "Federal Income Taxation
of AIMCO and AIMCO Stockholders -- General"), may result in dividends
increasing at a greater rate in the future.
GROWTH STRATEGIES
The Company seeks growth through two primary sources -- acquisition and
internal expansion.
Acquisition Strategies. The Company believes its acquisition strategies
will increase profitability and predictability of earnings by increasing its
geographic diversification, economies of scale and opportunities to provide
traditional ancillary services to tenants at the AIMCO Properties. Since AIMCO's
initial public offering in July 1994 (the "AIMCO IPO"), the Company has
completed numerous acquisition transactions, expanding its portfolio of owned or
managed properties from 132 apartment properties with 29,343 units to 2,303
apartment properties with 396,090 units as of October 1, 1998.
23
<PAGE> 29
The Company believes that its demonstrated ability to evaluate and complete
acquisitions, its property management record and its economies of scale, to the
extent that the Company can operate a property more efficiently than the
existing owner or some competing purchasers, all provide credibility and
advantage in negotiating acquisitions. In addition, the ability to issue OP
Units to sellers of properties may provide tax deferral opportunities to sellers
and could give the Company an advantage over competing buyers that cannot offer
such tax deferral opportunities. The Company acquires additional properties
primarily in three ways:
- Direct Acquisitions. The Company may directly acquire individual
properties or portfolios and controlling interests in entities that own
or control such properties or portfolios. During the year ended December
31, 1997, the Company has directly acquired 44 apartment properties for a
total consideration of $467.4 million, consisting of $191.0 million in
cash, approximately 1.9 million Common OP Units valued at $56.0 million
and the assumption or incurrence of $220.4 million of indebtedness. See
"-- Recent Property Acquisitions and Dispositions."
- Acquisition of Managed Properties. The Company believes that its property
management operations support its acquisition activities. Its
relationships with owners of the Managed Properties may provide it with a
means of learning of acquisition opportunities at an early stage of the
sale process. In addition, its familiarity with the property and its
ability to quickly evaluate the property give it an advantage in pursuing
and completing any such acquisition in a timely fashion. Since the AIMCO
IPO, the Company has acquired 12 properties comprising 3,530 units from
its managed portfolio for $129.0 million.
- Increasing its Interest in Partnerships. For properties where the Company
owns a general partnership interest in the property-owning partnership,
the Company may seek to acquire, subject to its fiduciary duties, the
outstanding limited partnership interests for cash or, in some cases, in
exchange for Common OP Units. After consummation of the Insignia Merger,
the AIMCO Operating Partnership intends to offer to purchase limited
partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The AIMCO Operating Partnership,
subject to applicable law, plans to offer to purchase certain of such
limited partnership interests in exchange for (i) equity securities of
the AIMCO Operating Partnership to be issued pursuant to the Registration
Statement of which this Prospectus forms a part, (ii) cash or (iii) a
combination of such equity securities and cash. Such offers are expected
to include terms that allow limited partners to continue to hold their
limited partnership interests.
- In November 1996, the Company acquired the English Partnerships, which
owned 22 apartment properties. The Company subsequently purchased
pursuant to tender offers to acquire all of the outstanding limited
partnership interests of 25 of the English Partnerships, approximately
46%, in the aggregate, of the outstanding limited partnership interests
in such partnerships for $15.0 million in cash and approximately 71,500
OP Units valued at $1.7 million.
- As of December 31, 1997, the Company has also commenced tender offers to
acquire all of the outstanding limited partnership interests in 26
partnerships owning 25 properties for an aggregate amount of
approximately $79.0 million. Through September 30, 1997, pursuant to such
tender offers, the Company has purchased approximately 20.2%, in the
aggregate, of the outstanding limited partnership interests for $16.0
million in cash.
Internal Growth Strategies. The Company pursues internal growth through the
following strategies:
- Revenue Increases. The Company increases rents where feasible and seeks
to improve occupancy rates. The Company believes that its policy of
capital improvements, amenities and customer service allows it to
maintain demand and to increase its rents above the rate of inflation in
the local market. The Company's "same store" revenues from the Owned
Properties (based on properties owned from period to period) have grown
by 3.3% from the fiscal year ended December 31, 1995 to that ended
December 31, 1996, and by 2.1% from the year ended December 31, 1996 to
that ended December 31, 1997, compared to an urban consumer price
inflation rate of 2.8% and 2.3% over the same periods.
24
<PAGE> 30
- Redevelopment of Properties. The Company believes redevelopment of
selected properties in superior locations provides advantages over
development of new properties, because, compared with new development,
redevelopment generally can be accomplished with relatively lower
financial risk, in less time and with reduced delays attributable to
governmental regulation. Recently the Company acquired and redeveloped
Sun Katcher, a 360-unit property in Jacksonville, Florida, at a cost of
$8.9 million, including $4.9 million in redevelopment costs. The Company
also recently commenced the renovation and upgrading of Bay West, a
376-unit property in Tampa, Florida, for a projected cost of $4.8
million, to reposition the property in the marketplace. In addition, the
Company expects to undertake a major renovation of the Morton Towers
apartments, a 1,277 unit property located in Miami Beach, Florida, at an
estimated cost of $35 million. The Company generally finances
redevelopment initially with borrowings from the Credit Facilities, and
subsequently arranges permanent financing.
- Expansion of Properties. The Company believes that expansion within or
adjacent to existing AIMCO Properties also provides growth opportunities
at lower risk than new development. Such expansion can offer cost
advantages to the extent common area amenities and on-site management
personnel can service the expanded property. Recently the Company
constructed 92 additional units at Fairways, in Phoenix, Arizona, at a
cost of $6.5 million. The Company is planning the construction of 42
additional units at Township, in Littleton, Colorado, for a projected
cost of more than $3.0 million. In addition, the Company owns or controls
approximately 136 acres of vacant land, adjacent to existing Owned
Properties or Equity Properties, which the Company believes is suitable
for the development of approximately 1,300 apartment units. The Company
generally finances expansions initially with borrowings from the Credit
Facilities, and subsequently arranges permanent financing.
- Conversion of Affordable Properties; Improvement of Performance. The
Company believes that it may be able to significantly increase its return
from its portfolio of affordable properties by improving operations at
some of its properties or by converting some of its properties to
conventional properties. While management of the Company has commenced
review of the affordable properties, it has not yet made any
determination as to the conversion of any affordable property.
- Ancillary Services. The Company's management believes that its ownership
and management of the AIMCO Properties provides it with unique access to
a customer base for the sale of additional services which generate
incremental revenues. The Company currently provides cable television,
telephone services and carport, garage and storage space rental at
certain AIMCO Properties. For example, as of June 30, 1998, the Company
has installed cable television service to 12,600 units and currently has
more than 7,400 subscribers.
- Controlling Expenses. Cost reductions are accomplished by exploiting
economies of scale. As a result of the size of its portfolio and its
creation of regional concentrations of properties, the Company has the
ability to leverage fixed costs for general and administrative
expenditures and certain operating functions, such as insurance,
information technology and training, over a larger property base. For
example, the Company's insurance subsidiary provides workers'
compensation and employer liability insurance company-wide, without
incurring material incremental costs as the Company's property assets
grow.
The Company also instills cost discipline in its property managers by
benchmarking their operations against the local market and other AIMCO
Properties.
25
<PAGE> 31
PROPERTY MANAGEMENT STRATEGIES
Divisions. The Company's property management strategy is to achieve
improvements in operating results by combining centralized financial control and
uniform operating procedures with localized property management decision making
and market knowledge. The Company's management operations are organized into
five divisions, each supervised by a Division Vice President, who has, on
average, 17 years of experience in apartment management.
<TABLE>
<CAPTION>
APARTMENT APARTMENT
UNITS COMMUNITIES
DIVISIONS MANAGED(1) MANAGED(1)
--------- ---------- -----------
<S> <C> <C>
Great West.......................................... 65,644 439
Southwest........................................... 62,718 309
Southeast........................................... 68,177 341
Mid Atlantic........................................ 63,390 473
Midwest............................................. 69,134 356
------- -----
329,063 1,918
======= =====
</TABLE>
- ---------------
(1) Includes only units and apartment communities managed by the Company as of
October 1, 1998. Does not include 31,311 units in 222 apartment communities
in which the Company has an ownership interest but does not manage, and
35,716 units in 163 apartment communities, all of which are managed as a
separate portfolio.
Customer Service. The Company believes that resident satisfaction is
directly related to the experience and training of on-site management personnel.
The Company provides on-site management trained to respond promptly to
residents' needs. To improve customer service, the Company conducts annual
resident satisfaction surveys, guarantees that material defects will be
corrected in 24 hours and refunds related rent if that commitment is not met.
Personnel Policies. The Company has attempted to reduce turnover and retain
experienced personnel by establishing an employee mentoring program and
providing managers with incentive-based compensation. In addition, managing
properties for third parties, the Company believes, improves performance at
Managed Properties and Owned Properties alike by subjecting property managers to
market-based pricing and service standards.
START. Properties that are behind budget or face other significant
operating difficulties receive direct supervision and intervention from START, a
team of professionals, led by Executive Vice President Steven Ira, a founder of
the Company. Members of START focus on not more than 10 to 15 properties at any
one time, which allows them to focus sharply on the subject properties. START
also oversees due diligence on acquisitions and major construction activities.
Management Incentives. The Company believes that equity ownership by
management and equity- and incentive-based compensation are important factors in
attracting, retaining and motivating the most qualified and experienced
personnel and directors. The Company's goal is to align management's interests
with those of stockholders through the use of equity-based compensation plans to
direct management's efforts towards enhancing shareholder value.
26
<PAGE> 32
The following table reflects the ownership of Class A Common Stock and OP
Units by senior management of the Company, which, as of June 30, 1998 (assuming
full conversion of OP Units), represented approximately 7.5% of the outstanding
Class A Common Stock.
<TABLE>
<CAPTION>
TOTAL SHARES OF
COMMON STOCK AND
OP UNITS OWNED PERCENTAGE
BY MANAGEMENT(1) OWNED INVESTMENT
---------------- ---------- ------------
<S> <C> <C> <C>
AIMCO IPO................................. 926,000 8.6% $ 17 million
December 31, 1995......................... 1,067,000 7.7% $ 21 million
December 31, 1996......................... 2,303,000 12.5% $ 65 million
December 31, 1997......................... 3,843,000 8.4% $141 million
June 30, 1998............................. 4,045,000 7.5% $160 million
</TABLE>
- ---------------
(1) Encumbered by outstanding secured partially recourse notes in the
amount of $45.5 million as of May 31, 1998.
- On July 25, 1997, eleven senior managers of AIMCO purchased 1.1 million
shares of Class A Common Stock at a price of $30 per share in exchange
for promissory notes secured by such stock, which notes are recourse as
to 25% of the principal owed.
- AIMCO pays a majority of the compensation to its outside directors in
Class A Common Stock.
- AIMCO issues all stock options at the then-current market price, and
requires that employees own Class A Common Stock before receiving their
options. As of May 31, 1998, the number of outstanding options was
5,235,997.
On January 21, 1998, the AIMCO Operating Partnership sold an aggregate of
15,000 OP Units designated as Class I High Performance Units (the "High
Performance Units") to a joint venture formed by fourteen of the Company's
officers, and to three of AIMCO's non-employee directors for an aggregate
purchase price of $2,070,000, of which $1,980,300 was paid by the joint venture
and an aggregate of $89,700 was paid by three non-employee directors. The
purchase price of the High Performance Units was determined by the AIMCO Board
of Directors, based upon the advice of an independent valuation expert that this
purchase price represented the fair market value of the High Performance Units.
The sale of the High Performance Units was ratified by the stockholders on May
8, 1998.
Holders of High Performance Units have no rights to receive distributions
or allocations of income or loss, or to redeem their High Performance Units
prior to the date (the "Valuation Date") that is the earlier of (i) January 1,
2001, or (ii) the date on which a change of control occurs. If, on the Valuation
Date, the cumulative Total Return of the Class A Common Stock from January 1,
1998 to the Valuation Date (the "Measurement Period") exceeds 115% of the
cumulative Total Return (as defined below) of a peer group index over the same
period, and is at least the equivalent of a 30% cumulative Total Return over
three years (the "Minimum Return"), then, on and after the Valuation Date,
holders of the 15,000 High Performance Units will be entitled to receive
distributions and allocations of income and loss from the AIMCO Operating
Partnership in the same amounts and at the same times (subject to certain
exceptions upon liquidation of the AIMCO Operating Partnership) as would holders
of a number of OP Units equal to the quotient obtained by dividing (i) the
product of (A) 15% of the amount by which the cumulative Total Return of the
Class A Common Stock over the Measurement Period exceeds the greater of 115% of
the peer group index or the Minimum Return, multiplied by (B) the weighted
average market value of the Company's equity capitalization (including Class A
Common Stock and OP Units) by (ii) the market value of one share of Class A
Common Stock on the Valuation Date. If, on the Valuation Date, the cumulative
Total Return of the Class A Common Stock does not satisfy these criteria, then,
on and after the Valuation Date, holders of the 15,000 High Performance Units
will be entitled to receive distributions and allocations of income and loss
from the AIMCO Operating Partnership in the same amounts and at the same times
(subject to certain exceptions upon a liquidation of the AIMCO Operating
Partnership) as would holders of 150 OP Units. For purposes of
27
<PAGE> 33
determining the market value of Class A Common Stock or OP Units as of any date,
the average closing price of the Class A Common Stock for the 20 trading days
immediately preceding such date is used. It is expected that the Morgan Stanley
REIT Index, a capitalization-weighted index with dividends reinvested of the
most actively traded real estate investment trusts, will be used as the peer
group index for purposes of the High Performance Units.
"Total Return" means, for any security and for any period, the cumulative
total return for such security over such period, as measured by (i) the sum of
(a) the cumulative amount of dividends paid in respect of such security for such
period (assuming that all cash dividends are reinvested in such security as of
the payment date for such dividend based on the security price on the dividend
payment date), and (b) an amount equal to (x) the security price at the end of
such period, minus (y) the security price at the beginning of such period,
divided by (ii) the security price at the beginning of the measurement period;
provided, however, that if the foregoing calculation results in a negative
number, the "Total Return" shall be equal to zero.
Upon the occurrence of a change of control, any holder of High Performance
Units may, subject to certain restrictions, require the AIMCO Operating
Partnership to redeem all or a portion of the High Performance Units held by
such party in exchange for a cash payment per unit equal to the market value of
a share of Class A Common Stock at the time of redemption. However, in the event
that any High Performance Units are tendered for redemption, the AIMCO Operating
Partnership's obligation to pay the redemption price is subject to the prior
right of AIMCO to acquire such High Performance Units in exchange for an equal
number of shares of Class A Common Stock (subject to certain adjustments).
ACCOUNTING POLICIES AND DEFINITIONS
The Company has the following accounting policies and definitions:
Funds from Operations. The Board of Governors of NAREIT defines FFO as net
income (loss), computed in accordance with generally accepted accounting
principles, excluding gains and losses from debt restructuring and sales of
property, plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. The Company calculates FFO in a manner
consistent with the NAREIT definition, which includes adjustments for minority
interest in the AIMCO Operating Partnership, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision for
unconsolidated subsidiaries and less the payment of dividends on perpetual
preferred stock. The Company's management believes that presentation of FFO
provides investors with industry accepted measurements which help facilitate
understanding of the Company's ability to meet required dividend payments,
capital expenditures, and principal payments on its debt. There can be no
assurance that the Company's basis of computing FFO is comparable with that of
other REITs.
Capital Replacements. The Company capitalizes spending for items which
generally cost more than $250 and have a useful life of more than one year, such
as carpet replacement, new appliances, new roofs or parking lot repaving.
Capitalized spending which maintains a property is termed a "Capital
Replacement." In the experience of the Company's management, this spending is
better considered a recurring cost of preserving an asset rather than an
additional investment.
Consolidation. For financial reporting purposes, the Company consolidates
the results of those corporations in which it owns a majority of the outstanding
voting stock, and those limited partnerships and limited liability companies in
which it owns both a general partnership or managing member interest and
controls investment decisions with respect to the underlying assets. The Company
generally has a 30% to 51% economic interest in such entities. Entities in which
the Company has less than a 30% economic interest or limited control are
accounted for on the equity method. The Company policy is generally to hold
Class C properties and affordable properties (substantially all of which are
Class C properties) in unconsolidated partnerships. The Company accounts for
these properties on the equity method in accordance with GAAP.
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POLICIES OF THE COMPANY WITH RESPECT TO CERTAIN OTHER ACTIVITIES
The following is a discussion of certain other investment objectives and
policies, financing policies and other policies of the Company. These policies
are determined by the officers and directors of AIMCO and may be amended or
revised from time to time at their discretion without a vote of AIMCO's
stockholders. As the sole general partner of the AIMCO Operating Partnership,
AIMCO also determines the investment policies of the AIMCO Operating
Partnership.
Investment in Others. The Company may also participate with other entities
in property ownership, through joint ventures or other types of co-ownership.
Any such equity investment may be subject to existing mortgage financing and
other indebtedness which would have priority over the equity of the Company in
that property.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities. The Company may also acquire securities of or interests in persons
engaged in the acquisition, redevelopment and/or management of multifamily
apartment properties.
Investments in Real Estate Mortgages. While the Company generally
emphasizes direct real estate investments, it may, in its discretion and subject
to the percentage ownership limitations and gross income tests necessary for
REIT qualification, invest in mortgage and other indirect real estate interests,
including securities of other real estate investment trusts. The Company has not
previously invested in mortgages or securities of other real estate investment
trusts and the Company does not presently intend to invest to a significant
extent in mortgages or securities of other real estate investment trusts.
Operating and Financing Policies. The Company seeks to maintain a ratio of
EBITDA (less a provision of approximately $300 per owned apartment unit) to debt
(the "Debt Coverage Ratio") of at least 2 to 1, and to match debt maturities to
the character of the assets financed. See "-- Operating and Financial
Strategies -- Debt Financing." The Company, however, may from time to time
re-evaluate borrowing policies in light of then current economic conditions,
relative costs of debt and equity capital, market values of properties, growth
and acquisition opportunities and other factors. The Company may modify its
borrowing policy and may increase or decrease its Debt Coverage Ratio policy.
To the extent that the AIMCO Board of Directors determines to seek
additional capital, the Company may raise such capital through additional equity
offerings, debt financing or retention of cash flow (after consideration of
provisions of the Code requiring the distribution by a REIT of a certain
percentage of taxable income and taking into account taxes that would be imposed
on undistributed taxable income), or through a combination of these sources. The
Company presently anticipates that any additional borrowings will be made
through the AIMCO Operating Partnership, although AIMCO might incur borrowings
that would be reloaned to the AIMCO Operating Partnership. The AIMCO Operating
Partnership cannot incur indebtedness that is recourse to AIMCO without AIMCO's
approval. AIMCO may approve the AIMCO Operating Partnership's incurring
additional debt that is recourse to the AIMCO Operating Partnership. Borrowings
may be unsecured or may be secured by any or all assets of AIMCO, the AIMCO
Operating Partnership, or any existing or new property and may have full or
limited recourse to all or any portion of the assets of AIMCO, the AIMCO
Operating Partnership, or any existing or new property.
The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on its portfolio as a
whole.
AIMCO may also determine to issue securities senior to the Class A Common
Stock, including preferred stock and debt securities (either of which may be
convertible into capital stock or be accompanied by warrants to purchase capital
stock). The Company may also determine to finance acquisitions through the
exchange of properties or issuance of additional OP Units, shares of Class A
Common Stock or other securities.
If the AIMCO Board of Directors determines to raise additional equity
capital, the AIMCO Board of Directors has the authority, without stockholder
approval, to issue additional shares of Class A Common Stock or other capital
stock (including securities senior to the Class A Common Stock) in any manner
(and on such terms and for such consideration) it deems appropriate, including
in exchange for property. Such
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issuances might cause a dilution of a stockholder's investment in AIMCO. If the
AIMCO Board of Directors determines to raise additional equity capital to fund
investments by the AIMCO Operating Partnership, AIMCO will contribute such funds
to the AIMCO Operating Partnership as a contribution to capital and purchase of
additional general partnership interests. AIMCO may issue additional shares of
Class A Common Stock in connection with the acquisition of OP Units that are
tendered to the AIMCO Operating Partnership for redemption.
The AIMCO Board of Directors also has the authority to cause the AIMCO
Operating Partnership to issue additional OP Units in any manner (and on such
terms and for such consideration) as it deems appropriate, including in exchange
for property. Any such new OP Units will be redeemable at the option of the
holder, which redemption AIMCO intends to cause to be made in Class A Common
Stock pursuant to the redemption rights.
Conflict of Interest Policies. The Company has adopted certain policies
designed to minimize or eliminate conflicts of interests between the Company and
its executive officers and directors. Without the approval of a majority of the
disinterested directors, the Company will not (i) acquire from or sell to any
director, officer or employee of the Company or any entity in which a director,
officer or employee of the Company owns more than a 1% interest, or acquire from
or sell to any affiliate of any of the foregoing, any assets or other property
of the Company, (ii) make any loan to or borrow from any of the foregoing
persons, or (iii) engage in any material transaction with the foregoing. In
addition, the Company has entered in to employment agreements with Messrs.
Considine, Kompaniez and Ira which include provisions intended to eliminate or
minimize potential conflicts of interest, and which provide that those persons
will be prohibited from engaging directly or indirectly in the acquisition,
development, operation or management of other multifamily apartment properties
outside of the Company, except with respect to certain investments currently
held by such persons, as to which investments those persons have committed to an
orderly liquidation. There can be no assurance, however, that these policies
always will be successful in eliminating the influence of such conflicts, and if
they are not successful, decisions could be made that might fail to reflect
fully the interests of AIMCO's stockholders as a whole.
Policies with Respect to Other Activities. The Company has authority to
offer shares of its capital stock or other securities and to repurchase or
otherwise reacquire its shares or any other securities, has done so, and may
engage in such activities in the future. From its inception, the Company has
made loans aggregating $5.1 million to certain entities owning properties
subsequently acquired by the Company. No balances remain outstanding on such
loans. In the same period, the Company has made loans aggregating $76.5 million
to its officers for the purchase of Class A Common Stock and $5.1 million to its
officers and other entities to acquire interests in subsidiaries of the Company.
The outstanding balances on such loans as of August 31, 1998 were $42.7 million
and $3.1 million, respectively. Messrs. Considine and Kompaniez have repaid in
part, using $2.0 million in proceeds distributed to them from the sale of NHP
Common Stock by AIMCO/NHP Holdings, Inc. ("ANHI") to AIMCO, outstanding
promissory notes payable by them to ANHI in an aggregate amount of $3.2 million,
which loan was made to them by ANHI to acquire their interest in ANHI. In
addition, the Company from time to time advances amounts for relocation and
other expenses. The Company has not engaged in underwriting securities of other
issuers. Each of AIMCO and the AIMCO Operating Partnership intend to make
investments in such a way that it will not be treated as an investment company
under the Investment Company Act of 1940, as amended.
The Company may invest in the securities of other issuers engaged in the
ownership, acquisition or management of multifamily apartment properties for the
purpose of exercising control.
At all times, the Company intends to make investments in such a manner as
to be consistent with the requirements of the Code for AIMCO to qualify as a
REIT unless, because of changing circumstances or changes in the Code (or in
Treasury Regulations), the AIMCO Board of Directors determines that it is no
longer in the best interest of AIMCO to qualify as a REIT.
AIMCO, as a REIT, is required to distribute annually to holders of Class A
Common Stock at least 95% of its "REIT taxable income," which, as defined by the
Code and the Treasury Regulations, is generally equivalent to net taxable
ordinary income. AIMCO measures its economic profitability, and intends to pay
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regular dividends to its stockholders, based on earnings during the relevant
period. However, the future payment of dividends by AIMCO will be at the
discretion of the AIMCO Board of Directors and will depend on numerous factors,
including AIMCO's financial condition, its capital requirements, the annual
distribution requirements under the provisions of the Code applicable to REITs
and such other factors as the AIMCO Board deems relevant.
YEAR 2000 COMPLIANCE
The Company's management has determined that it will be necessary to modify
or replace certain accounting and operational software and hardware to enable
its computer systems to operate properly subsequent to December 31, 1999. As a
result, management has appointed a team of internal staff to research and manage
the conversion or replacement of existing systems to comply with year 2000
requirements. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operations, and that transactions
with tenants, suppliers and financial institutions are fully supported.
The Company utilizes numerous accounting and reporting software packages
and computer hardware to conduct its business, some of which already comply with
year 2000 requirements. Management estimates that the modification or
replacement of non-compliant accounting and reporting software and hardware will
total approximately $0.3 million.
The Company's management also believes that certain of the Owned Properties
possess operational systems (e.g. elevators, fire alarm and extinguishment
systems and security systems) which also must be modified or replaced in order
to function properly in the 21st century. Management is currently engaged in the
identification of all non-compliant operational systems, and has not yet
determined the estimated cost of replacing or modifying such systems.
DESCRIPTION OF PREFERRED STOCK
GENERAL
AIMCO may issue, from time to time, shares of one or more series or classes
of Preferred Stock. The following description sets forth certain general terms
and provisions of the Preferred Stock to which any Prospectus Supplement may
relate. The particular terms of any series of Preferred Stock that may be issued
and sold pursuant hereto, and the extent, if any, to which such general
provisions may apply to the series of Preferred Stock so offered will be
described in the Prospectus Supplement relating to such Preferred Stock. The
following summary of certain provisions of the Preferred Stock do not purport to
be complete and is subject to, and is qualified in its entirety by express
reference to, the provisions of the Charter relating to a specific series of the
Preferred Stock, which will be in the form filed as an exhibit to or
incorporated by reference in the Registration Statement of which this Prospectus
is a part at or prior to the time of issuance of such series of Preferred Stock.
The Charter authorizes the issuance of up to 510,750,000 shares of its
capital Stock. As of October 1, 1998, 486,027,500 shares were classified as
Class A Common Stock, 262,500 shares were classified as Class B Common Stock,
750,000 shares were classified as Class B Cumulative Convertible Preferred
Stock, par value $.01 per share ("Class B Preferred Stock"), 2,760,000 shares
were classified as Class C Cumulative Preferred Stock, par value $.01 per share
("Class C Preferred Stock"), 4,600,000 shares were classified as Class D
Cumulative Preferred Stock, par value $.01 per share ("Class D Preferred
Stock"), 10,000,000 shares were classified as Class E Cumulative Preferred
Stock, par value $.01 per share ("Class E Preferred Stock"), 4,050,000 shares
were classified as Class G Cumulative Preferred Stock, par value $.01 per share
("Class G Preferred Stock"), and 2,300,000 shares were classified as Class H
Cumulative Preferred Stock, par value $.01 per share ("Class H Preferred
Stock"). Under the Charter, the AIMCO Board of Directors has the authority to
classify and reclassify any of its unissued capital Stock into shares of
Preferred Stock by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of such shares of capital Stock including, but not limited to, ownership
restrictions consistent with the Ownership Limit with respect to each
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series or class of capital Stock, and the number of shares constituting each
series or class, and to increase or decrease the number of shares of any such
series or class, to the extent permitted by the Maryland General Corporation Law
(the "MGCL").
The AIMCO Board of Directors is authorized to determine for each series of
Preferred Stock, and the Prospectus Supplement will set forth with respect to
each class or series that may be issued and sold pursuant hereto: (i) the
designation of such shares and the number of shares that constitute such series,
(ii) the dividend rate (or the method of calculation thereof), if any, on the
shares of such series and the priority as to payment of dividends with respect
to other classes or series of capital stock of AIMCO, (iii) the dividend periods
(or the method of calculation thereof), (iv) the voting rights of the shares,
(v) the liquidation preference and the priority as to payment of such
liquidation preference with respect to other classes or series of capital stock
of AIMCO and any other rights of the shares of such series upon any liquidation
or winding-up of AIMCO, (vi) whether or not and on what terms the shares of such
series will be subject to redemption or repurchase at the option of AIMCO, (vii)
whether and on what terms the shares of such series will be convertible into or
exchangeable for other debt or equity securities of AIMCO, (viii) whether the
shares of such series of Preferred Stock will be listed on a securities
exchange, (ix) any special United States federal income tax considerations
applicable to such series, and (x) the other rights and privileges and any
qualifications, limitations or restrictions of such rights or privileges of such
series not inconsistent with the Charter and the MGCL.
DIVIDENDS
Holders of shares of Preferred Stock, shall be entitled to receive, when
and as declared by the AIMCO Board of Directors, out of funds of AIMCO legally
available therefor, an annual cash dividend payable at such dates and at such
rates, if any, per share per annum as set forth in the applicable Prospectus
Supplement.
Each series of Preferred Stock that may be issued and sold pursuant hereto,
will rank junior as to dividends to any Preferred Stock that may be issued in
the future that is expressly senior as to dividends to the Preferred Stock. If
at any time AIMCO has failed to pay accrued dividends on any such senior shares
at the time such dividends are payable, AIMCO may not pay any dividend on the
Preferred Stock or redeem or otherwise repurchase shares of Preferred Stock
until such accumulated but unpaid dividends on such senior shares have been paid
or set aside for payment in full by AIMCO.
No dividends (other than in Class A Common Stock or Class B Common Stock
(collectively, the "Common Stock") or other capital Stock ranking junior to the
Preferred Stock of any series as to dividends and upon liquidation) shall be
declared or paid or set aside for payment, nor shall any other distribution be
declared or made upon the Common Stock, or any other capital stock of AIMCO
ranking junior to or on a parity with the Preferred Stock of such series as to
dividends, nor shall any Common Stock or any other capital stock of AIMCO
ranking junior to or on a parity with the Preferred Stock of such series as to
dividends or upon liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by AIMCO (except by
conversion into or exchange for other capital stock of AIMCO ranking junior to
the Preferred Stock of such series as to dividends and upon liquidation) unless
(i) if such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for all past dividend periods and the then current dividend period and
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period; provided, however,
that any monies theretofore deposited in any sinking fund with respect to any
Preferred Stock in compliance with the provisions of such sinking fund may
thereafter be applied to the purchase or redemption of such Preferred Stock in
accordance with the terms of such sinking fund, regardless of whether at the
time of such application full cumulative dividends upon shares of the Preferred
Stock outstanding on the last dividend payment date shall have been paid or
declared and set apart for payment; and provided, further, that any such junior
or parity preferred stock or Common
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Stock may be converted into or exchanged for stock of AIMCO ranking junior to
the Preferred Stock as to dividends.
The amount of dividends payable for the initial dividend period or any
period shorter than a full dividend period shall be computed on the basis of a
360-day year of twelve 30-day months. Accrued but unpaid dividends will not bear
interest.
CONVERTIBILITY
The applicable Prospectus Supplement for each series of Preferred Stock
that may be issued and sold pursuant hereto will set forth the terms and
conditions of such series of Preferred Stock with respect to whether such series
of Preferred Stock will be convertible into, or exchangeable for, other
securities or property, including the initial conversion or exchange rate and
any adjustments thereto, the conversion or exchange period and any other
conversion or exchange provisions.
REDEMPTION AND SINKING FUND
The applicable Prospectus Supplement for each series of Preferred Stock
that may be issued and sold pursuant hereto will set forth the terms and
conditions of such series of Preferred Stock with respect to redemption rights
and the benefit of any sinking fund, including the dates and redemption prices
of any such redemption, any conditions thereto, and any other redemption or
sinking fund provisions.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of AIMCO, the
holders of shares of each series of Preferred Stock that may be issued and sold
pursuant hereto are entitled to receive out of assets of AIMCO available for
distribution to stockholders, before any distribution of assets is made to
holders of: (i) any other shares of Preferred Stock ranking junior to such
series of Preferred Stock as to rights upon liquidation, dissolution or winding
up; and (ii) shares of Common Stock, liquidating distributions per share in the
amount of the liquidation preference specified in the applicable Prospectus
Supplement for such series of Preferred Stock plus any dividends accrued and
accumulated but unpaid to the date of final distribution; but the holders of
each series of Preferred Stock will not be entitled to receive the liquidating
distribution of, plus such dividends on, such shares until the liquidation
preference of any shares of AIMCO's capital stock ranking senior to such series
of the Preferred Stock as to the rights upon liquidation, dissolution or winding
up shall have been paid (or a sum set aside therefor sufficient to provide for
payment) in full. If upon any liquidation, dissolution or winding up of AIMCO,
the amounts payable with respect to the Preferred Stock, and any other Preferred
Stock ranking as to any such distribution on a parity with the Preferred Stock
are not paid in full, the holders of the Preferred Stock and such other parity
preferred stock will share ratably in any such distribution of assets in
proportion to the full respective preferential amount to which they are
entitled. After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of Preferred Stock will not be
entitled to any further participation in any distribution of assets by AIMCO.
Neither a consolidation or merger of AIMCO with another corporation nor a sale
of securities shall be considered a liquidation, dissolution or winding up of
AIMCO.
VOTING RIGHTS
Holders of Preferred Stock that may be issued and sold pursuant hereto will
have the voting rights required by law and the voting rights described below.
Whenever dividends on any applicable series of Preferred Stock or any other
class or series of stock ranking on a parity with the applicable series of
Preferred Stock with respect to the payment of dividends shall be in arrears for
the equivalent of six quarterly dividend periods, whether or not consecutive,
the holders of shares of such series of Preferred Stock (voting separately as a
class with all other series of Preferred Stock then entitled to such voting
rights) will be entitled to vote for the election of two of the authorized
number of directors of AIMCO at the next annual meeting of stockholders and at
each subsequent meeting until all dividends accumulated on such series of
Preferred Stock shall have been fully paid or set apart for payment. The term of
office of all directors elected by the holders of
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such Preferred Stock shall terminate immediately upon the termination of the
right of the holders of such Preferred Stock to vote for directors. Holders of
shares of Preferred Stock that may be issued and sold pursuant hereto will have
one vote for each share held.
So long as any shares of any series of Preferred Stock remain outstanding,
AIMCO shall not, without the consent of holders of at least two-thirds of the
shares of such series of Preferred Stock outstanding at the time, voting
separately as a class with all other series of Preferred Stock of AIMCO upon
which like voting rights have been conferred and are exercisable, (i) issue or
increase the authorized amount of any class or series of stock ranking prior to
the outstanding Preferred Stock as to dividends or upon liquidation or (ii)
amend, alter or repeal the provisions of the Charter relating to such series of
Preferred Stock, whether by merger, consolidation or otherwise, so as to
materially adversely affect any power, preference or special right of such
series of Preferred Stock or the holders thereof; provided, however, that any
increase in the amount of the authorized Common Stock or authorized Preferred
Stock or any increase or decrease in the number of shares of any series of
Preferred Stock or the creation and issuance of other series of Common Stock or
Preferred Stock ranking on a parity with or junior to Preferred Stock as to
dividends and upon liquidation, dissolution or winding up shall not be deemed to
materially adversely affect such powers, preferences or special rights.
MISCELLANEOUS
The holders of Preferred Stock will have no preemptive rights. The
Preferred Stock that may be issued and sold pursuant hereto, upon issuance
against full payment of the purchase price therefor, will be fully paid and
nonassessable. Shares of Preferred Stock redeemed or otherwise reacquired by
AIMCO shall resume the status of authorized and unissued shares of Preferred
Stock undesignated as to series, and shall be available for subsequent issuance.
The applicable Prospectus Supplement will set forth the restrictions, if any, on
repurchase or redemption of the Preferred Stock while there is any arrearage on
sinking fund installments. Payment of dividends on, and the redemption or
repurchase of, any series of Preferred Stock may be restricted by loan
agreements, indentures and other agreements entered into by AIMCO. The
applicable Prospectus Supplement will describe any material contractual
restrictions on such dividend payments.
OTHER RIGHTS
The shares of a series of Preferred Stock that may be issued and sold
pursuant hereto will have the preferences, voting powers or relative,
participating, optional or other special rights set forth above or in the
applicable Prospectus Supplement or the Charter or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for each series of Preferred Stock that
may be issued and sold pursuant hereto will be designated in the applicable
Prospectus Supplement.
CLASS B PREFERRED STOCK
On August 4, 1997, AIMCO issued 750,000 shares of its Class B Preferred
Stock to an institutional investor (the "Preferred Share Investor") in a private
transaction. The Class B Preferred Stock (a) ranks prior to the Common Stock and
the Class E Preferred Stock with respect to dividends, liquidation, dissolution
and winding-up, and has an aggregate liquidation value of $75 million and (b)
ranks on parity with the Class C Preferred Stock, the Class D Preferred Stock,
the Class G Preferred Stock and the Class H Preferred Stock. Holders of the
Class B Preferred Stock are entitled to receive, when, as and if declared by the
AIMCO Board of Directors, quarterly cash dividends per share equal to the
greater of (i) $1.78125 (the "Base Rate") and (ii) the cash dividends declared
on the number of shares of Class A Common Stock into which one share of Class B
Preferred Stock is convertible. On or after August 4, 1998, each share of Class
B Preferred Stock may be converted at the option of the holder into 3.28407
shares of Class A Common Stock, subject to certain anti-dilution adjustments.
AIMCO may redeem any or all of the Class B Preferred Stock on or after August 4,
2002, at a redemption price of $100 per share, plus unpaid dividends accrued on
the shares redeemed.
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Holders of Class B Preferred Stock, voting as a class with the holders of
all AIMCO capital stock that ranks on a parity with the Class B Preferred Stock
with respect to the payment of dividends or upon liquidation, dissolution,
winding up or otherwise ("Class B Parity Stock"), will be entitled to elect (i)
two directors of AIMCO if six quarterly dividends (regardless of whether
consecutive) on the Class B Preferred Stock or any Class B Parity Stock are in
arrears, and (ii) one director of AIMCO if for two consecutive quarterly
dividend periods AIMCO fails to pay at least $0.4625 in dividends on the Class A
Common Stock. The affirmative vote of the holders of two-thirds of the
outstanding shares of Class B Preferred Stock will be required to amend the
Charter in any manner that would adversely affect the rights of the holders of
Class B Preferred Stock, and to approve the issuance of any capital stock that
ranks senior to the Class B Preferred Stock with respect to payment of dividends
or upon liquidation, dissolution, winding up or otherwise. If the IRS were to
make a final determination that AIMCO does not qualify as a REIT in accordance
with Sections 856 through 860 of the Internal Revenue Code, the Base Rate for
the quarterly cash dividends on the Class B Preferred Stock would increase to
$3.03125 per share.
The agreement pursuant to which AIMCO issued the Class B Preferred Stock
(the "Preferred Share Purchase Agreement") provides that the Preferred Share
Investor may require AIMCO to repurchase such investor's Class B Preferred Stock
in whole or in part at a price of 105% of the liquidation preference thereof,
plus accrued and unpaid dividends on the purchased shares, if (i) AIMCO shall
fail to continue to be taxed as a REIT pursuant to Sections 856 through 860 of
the Internal Revenue Code, or (ii) upon the occurrence of a change of control
(as defined in the Preferred Share Purchase Agreement). The Preferred Share
Purchase Agreement also provides that, so long as the Preferred Share Investor
owns Class B Preferred Stock with an aggregate liquidation preference of at
least $18.75 million, neither AIMCO, the AIMCO Operating Partnership nor any
subsidiary of AIMCO may issue preferred securities or incur indebtedness for
borrowed money if immediately following such issuance and after giving effect
thereto and the application of the net proceeds therefrom, AIMCO's ratio of
aggregate consolidated earnings before interest, taxes, depreciation and
amortization to aggregate consolidated fixed charges for the four fiscal
quarters immediately preceding such issuance would be less than 1.5 to 1.
Subject to certain exceptions specified in the provisions of the Charter
establishing the terms of the Class B Preferred Stock, no holder may own, or be
deemed to own by virtue of various attribution and constructive ownership
provisions of the Internal Revenue Code and Rule 13d-3 under the Securities
Exchange Act of 1934, shares of Class B Preferred Stock with a value in excess
of the amount by which (i) 8.7% (or 15% in the case of certain pension trusts
described in the Internal Revenue Code, investment companies registered under
the Investment Company Act of 1940 and Mr. Considine) of the aggregate value of
all shares of capital stock of AIMCO exceeds (ii) the aggregate value of all
shares of capital stock of AIMCO, other than Class B Preferred Stock, that are
owned by such holder (the "Class B Preferred Ownership Limit"). The AIMCO Board
of Directors may waive such ownership limit if evidence satisfactory to the
AIMCO Board and AIMCO's tax counsel is presented that such ownership will not
then or in the future jeopardize AIMCO's status as a REIT. As a condition of
such waiver, the AIMCO Board of Directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class B Preferred Stock in
excess of the Class B Preferred Ownership Limit, or shares of Class B Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Internal Revenue Code, or which would otherwise result in
AIMCO failing to qualify as a REIT, are issued or transferred to any person,
such issuance or transfer will be null and void to the intended transferee, and
the intended transferee would acquire no rights to the stock. Shares of Class B
Preferred Stock transferred in excess of the Class B Preferred Ownership Limit
or other applicable limitations will automatically be transferred to a trust for
the exclusive benefit of one or more qualifying charitable organizations to be
designated by AIMCO. Shares transferred to such trust will remain outstanding,
and the trustee of the trust will have all voting and dividend rights pertaining
to such shares. The trustee of such trust may transfer such shares to a person
whose ownership of such shares does not violate the Class B Preferred Ownership
Limit or other applicable limitation. Upon a sale of such shares by the trustee,
the interest of the charitable beneficiary will terminate, and the sales
proceeds would be paid, first, to the original intended transferee, to the
extent of the lesser of (a) such transferee's original purchase price (or the
original market value of such shares if purportedly acquired by gift or devise)
and (b) the price received by
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the trustee, and, second, any remainder to the charitable beneficiary. In
addition, shares of stock held in such trust are purchasable by AIMCO for a
90-day period at a price equal to the lesser of the price paid for the stock by
the original intended transferee (or the original market value of such shares if
purportedly acquired by gift or devise) and the market price for the stock on
the date that AIMCO determines to purchase the stock. The 90-day period
commences on the date of the violative transfer or the date that the AIMCO Board
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class B Preferred Stock bear a
legend referring to the restrictions described above.
CLASS C PREFERRED STOCK
On December 23, 1997, AIMCO issued 2,400,000 shares of its 9% Class C
Preferred Stock in an underwritten public offering for net proceeds of
approximately $57.9 million. The Class C Preferred Stock (a) ranks prior to the
Common Stock, the Class E Preferred Stock and any other class or series of
capital stock of AIMCO if the holders of the Class C Preferred Stock are
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution, and winding-up in preference or priority to the
holders of shares of such class or series ("Class C Junior Stock"), (b) ranks on
parity with the Class B Preferred Stock, the Class D Preferred Stock, the Class
G Preferred Stock and the Class H Preferred Stock, and with any other class or
series of capital stock of AIMCO if the holders of such class of stock or series
and the Class C Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class C Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series shall be entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding up in preference or priority to the holders of the Class C Preferred
Stock ("Class C Senior Stock").
Holders of Class C Preferred Stock are entitled to receive cash dividends
at the rate of 9% per annum of the $25 liquidation preference (equivalent to
$2.25 per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year. Upon any liquidation, dissolution or
winding up of AIMCO, before payment or distribution by AIMCO shall be made to or
set apart for the holders of any shares of Class C Junior Stock, the holders of
Class C Preferred Stock shall be entitled to receive a liquidation preference of
$25 per share (the "Class C Liquidation Preference"), plus an amount equal to
all accumulated, accrued and unpaid dividends to the date of final distribution
to such holders; but such holders shall not be entitled to any further payment.
If proceeds available for distribution shall be insufficient to pay the
preference described above and any liquidating payments on any other shares of
any class or series of Class C Parity Stock, then such proceeds shall be
distributed among the holders of Class C Preferred Stock and any such other
Class C Parity Stock ratably in the same proportion as the respective amounts
that would be payable on such Class C Preferred Stock and any such other Class C
Parity Stock if all amounts payable thereon were paid in full.
On and after December 23, 2002, AIMCO may redeem shares of Class C
Preferred Stock, in whole or in part, at a cash redemption price equal to 100%
of the Class C Liquidation Preference plus all accrued and unpaid dividends to
the date fixed for redemption. The Class C Preferred Stock has no stated
maturity and will not be subject to any sinking find or mandatory redemption
provisions.
Holders of shares of Class C Preferred Stock have no voting rights, except
that if distributions on Class C Preferred Stock or any series or class of Class
C Parity Stock shall be in arrears for six or more quarterly periods, the number
of directors constituting the AIMCO Board shall be increased by two and the
holders of Class C Preferred Stock (voting together as a single class with all
other shares of Class C Parity Stock which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class C Preferred Stock called for such purpose. The
affirmative vote of the holders of two thirds of the outstanding shares of Class
C Preferred Stock will be required to amend the Charter in any manner that would
adversely affect the rights of the holders of Class C Preferred Stock, and to
approve the issuance of any capital Stock that ranks senior to the Class C
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
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There are ownership restrictions applicable to the Class C Preferred Stock
that are similar to those for the Class B Preferred Stock.
CLASS D PREFERRED STOCK
On February 19, 1998, AIMCO issued 4,200,000 shares of its 8 3/4% Class D
Preferred Stock, in an underwritten public offering, for net proceeds of
approximately $101.5 million. The Class D Preferred Stock (a) ranks prior to the
Common Stock, the Class E Preferred Stock, and any other class or series of
capital stock of AIMCO if the holders of the Class D Preferred Stock are to be
entitled to the receipt of dividends of or amounts distributable upon
liquidation, dissolution, and winding-up in preference or priority to the
holders of shares of such class or series ("Class D Junior Stock"), (b) ranks on
parity with the Class B Preferred Stock, the Class C Preferred Stock, the Class
G Preferred Stock and the Class H Preferred Stock, and with any other class or
series of capital stock of AIMCO if the holders of such class of stock or series
and the Class D Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class D Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series shall be entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding up in preference or priority to the holders of the Class D Preferred
Stock ("Class D Senior Stock").
Holders of Class D Preferred Stock are entitled to receive cash dividends
at the rate of 8 3/4% per annum of the $25 liquidation preference (equivalent to
$2.1875 per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year. Upon any liquidation, dissolution or
winding up of AIMCO, before payment or distribution by AIMCO shall be made to or
set apart for the holders of any shares of Class D Junior Stock, the holders of
Class D Preferred Stock shall be entitled to receive a liquidation preference of
$25 per share (the "Class D Liquidation Preference"), plus an amount equal to
all accumulated, accrued and unpaid dividends to the date of final distribution
to such holders; but such holders shall not be entitled to any further payment.
If proceeds available for distribution shall be insufficient to pay the
preference described above and any liquidating payments on any other shares of
any class or series of Class D Parity Stock, then such proceeds shall be
distributed among the holders of Class D Preferred Stock and any such other
Class D Parity Stock ratably in the same proportion as the respective amounts
that would be payable on such Class D Preferred Stock and any such other Class D
Parity Stock if all amounts payable thereon were paid in full.
On and after February 19, 2003, AIMCO may redeem shares of Class D
Preferred Stock, in whole or in part, at a cash redemption price equal to 100%
of the Class D Liquidation Preference plus all accrued and unpaid dividends to
the date fixed for redemption. The Class D Preferred Stock has no stated
maturity and will not be subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class D Preferred Stock have no voting rights, except
that if distributions on Class D Preferred Stock or any series or class of Class
D Parity Stock shall be in arrears for six or more quarterly periods, the number
of directors constituting the AIMCO Board shall be increased by two and the
holders of Class D Preferred Stock (voting together as a single class with all
other shares of Class D Parity Stock which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class D Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
D Preferred Stock will be required to amend the Charter in any manner that would
adversely affect the rights of the holders of Class D Preferred Stock, and to
approve the issuance of any capital stock that ranks senior to the Class D
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
There are ownership restrictions applicable to the Class D Preferred Stock
that are similar to those for the Class B Preferred Stock.
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CLASS E PREFERRED STOCK
On October 1, 1998, Insignia Financial Group, Inc. was merged into AIMCO.
As merger consideration, AIMCO will issue to former Insignia stockholders up to
8,945,921 shares of Class E Preferred Stock. The Class E Preferred Stock (a)
ranks prior to Common Stock, and any other class or series of capital stock of
AIMCO if holders of the Class E Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class E Junior Stock"), (b) ranks on a parity with any class or
series of capital stock of AIMCO if the holders of such class or series of stock
and the Class E Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class E Parity Stock") and (c) ranks junior to the Class B Preferred Stock,
the Class C Preferred Stock, the Class D Preferred Stock, the Class G Preferred
Stock, the Class H Preferred Stock and any other class or series of capital
stock of AIMCO if the holders of such class or series shall be entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding up in preference or priority to the holders of the Class E Preferred
Stock ("Class E Senior Stock").
On any date (each, a "Dividend Payment Date") on which cash dividends are
paid on the Class A Common Stock prior to the Class E Conversion Date (as
defined below), holders of Class E Preferred Stock are entitled to receive cash
dividends payable in an amount per share of Class E Preferred Stock equal to the
per share dividend payable on Class A Common Stock on such Dividend Payment
Date. Such dividends shall be cumulative from the date of original issue, and
shall be payable quarterly in arrears on the Dividend Payment Dates, commencing
on the first Dividend Payment Date after the date of original issue. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO shall be made to or set apart for the holders of any shares of Class E
Junior Stock, the holders of Class E Preferred Stock shall be entitled to
receive a liquidation preference of $1 per share plus the Special Dividend if
such dividend is unpaid on the date of the final distribution to such holders
(collectively, the "Class E Liquidation Preference"), and thereafter each share
of Class E Preferred Stock shall have the same rights with respect to assets of
AIMCO as one share of Class A Common Stock.
On or after the twentieth anniversary of the Effective Time, AIMCO may
redeem shares of Class E Preferred Stock, in whole or in part, at a cash
redemption price equal to the sum of (i) the greater of (A) the Current Market
Price (as defined below) of the Class A Common Stock on the date specified for
redemption by AIMCO in a notice sent to holders of Class E Preferred Stock (the
"Class E Call Date") or (B) the AIMCO Index Price, but determined without giving
effect to the limitation of $38.00 per share, plus (ii) all accrued and unpaid
dividends to the Call Date. The Class E Preferred Stock has no stated maturity
and will not be subject to any sinking fund or mandatory redemption provisions.
"Current Market Price" per share of Class A Common Stock on any date means
the average of the daily market prices of a share of Class A Common Stock for
the five consecutive trading days preceding such date. The market price for each
such day shall mean the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NYSE or, if the Class A Common Stock is not listed or admitted to
trading on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Class A Common Stock is listed or admitted to
trading or, if the Class A Common Stock is not listed or admitted to trading on
any national securities exchange, the last quoted price, or if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the Class A Common
Stock is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Class A Common Stock selected by the AIMCO Board.
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Holders of shares of Class E Preferred Stock are entitled to one-half
( 1/2) of one vote with respect to all matters in which holders of Class A
Common Stock are entitled to vote thereon. In addition, if any portion of the
Special Dividend has yet to be declared and paid to the holders of Class E
Preferred Stock on January 15, 1999, or if distributions on Class E Preferred
Stock or any series or class of Parity Stock shall be in arrears for six or more
quarterly periods, the number of directors constituting the AIMCO Board shall be
increased by two and the holders of Class E Preferred Stock (voting together as
a single class with all other shares of Class E Parity Stock which are entitled
to similar voting rights) will be entitled to vote for the election of such
additional directors. Such right shall continue until full cumulative dividends
for all past dividend periods on all shares of Preferred Stock, including any
shares of Class E Preferred Stock, have been paid or declared and set apart for
payment.
On any date which the Special Dividend, or any portion thereof, is paid
(which may be declared by the AIMCO Board in its sole discretion), the holders
of Class E Preferred Stock shall be entitled to receive an amount per share of
Class E Preferred Stock equal to the Special Dividend divided by the Series E
Conversion Ratio (as defined in the Insignia Merger Agreement). After January
15, 1999, if any portion of the Special Dividend or any other dividend has yet
to be declared and paid to the holders of Class E Preferred Stock, no dividends
may be declared or paid or set apart for payment by AIMCO on its Common Stock.
On the close of business on the day on which the Special Dividend (or any
remaining unpaid portion thereof) is paid to the holders of the Class E
Preferred Stock, each share of Class E Preferred Stock will be automatically
converted into one share of Class A Common Stock without any action on the part
of AIMCO or the holder of such share (the "Class E Conversion Date"). If AIMCO
at any time following the Effective Time pays a dividend or makes a
distribution, subdivides, combines, reclassifies, issues rights, options or
warrants or makes any other distribution in securities in relation to its
outstanding Class A Common Stock, then AIMCO will contemporaneously do the same
with respect to the Class E Preferred Stock.
CLASS G PREFERRED STOCK
On July 15, 1998, AIMCO issued 4,050,000 shares of its Class G Preferred
Stock, in an underwritten public offering for net proceeds of approximately
$98.0 million. The Class G Preferred Stock (a) ranks prior to the Common Stock,
the Class E Preferred Stock and any other class or series of capital Stock of
AIMCO, if the holders of the Class G Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class G Junior Stock"), (b) ranks on parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock and
the Class H Preferred Stock and with any other class or series of capital Stock
of AIMCO, if the holders of such class of Stock or series and the Class G
Preferred Stock shall be entitled to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding-up in proportion to their
respective amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority one over the other ("Class G Parity
Stock") and (c) ranks junior to any class or series of capital Stock of AIMCO if
the holders of such class or series shall be entitled to the receipt of
dividends or amounts distributable upon liquidation, dissolution or winding-up
in preference or priority to the holders of the Class G Preferred Stock ("Class
G Senior Stock").
Holders of Class G Preferred Stock are entitled to receive cash dividends
at the rate of 9 3/8% per annum of the $25 liquidation preference (equivalent to
$2.34375 per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing October 15, 1998. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO shall be made to or set apart for the holders of any shares of Class G
Junior Stock, the holders of Class G Preferred Stock shall be entitled to
receive a liquidation preference of $25 per share (the "Class G Liquidation
Preference"), plus an amount equal to all accumulated, accrued and unpaid
dividends to the date of final distribution to such holders; but such holders
shall not be entitled to any further payment. If proceeds available for
distribution shall be insufficient to pay the preference described above and any
liquidating payments on any other shares of any class or series of Class G
Parity Stock, then such proceeds shall be distributed among the holders of Class
G Preferred Stock and any such other Class G Parity Stock ratably in the same
proportion as the respective amount that would be payable on
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such Class G Preferred Stock and any such other Class G Parity Stock if all
amounts payable thereon were paid in full.
On and after July 15, 2008, AIMCO may redeem shares of Class G Preferred
Stock, in whole or in part, at a cash redemption price equal to 100% of the
Class G Liquidation Preference plus all accrued and unpaid dividends to the date
fixed for redemption. The Class G Preferred Stock has no stated maturity and
will not be subject to any sinking fund or mandatory redemption provisions.
Holders of shares of Class G Preferred Stock have no voting rights, except
that if distributions on Class G Preferred Stock or any series or class of Class
G Parity Stock shall be in arrears for six or more quarterly periods, the number
of directors constituting the AIMCO Board shall be increased by two and the
holders of Class G Preferred Stock (voting together as a single class with all
other shares of Class G Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class G Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
G Preferred Stock will be required to amend the Charter in any manner that would
adversely affect the rights of the holders of Class G Preferred Stock, and to
approve the issuance of any capital Stock that ranks senior to the Class G
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
There are ownership restrictions applicable to the Class G Preferred Stock
that are similar to those for the Class B Preferred Stock.
CLASS H PREFERRED STOCK
On August 11, 1998, AIMCO issued 2,000,000 shares of its Class H Preferred
Stock, in an underwritten public offering for net proceeds of approximately
$48.1 million. The Class H Preferred Stock (a) ranks prior to the Common Stock,
the Class E Preferred Stock and any other class or series of capital Stock of
AIMCO if the holders of the Class H Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class H Junior Stock"), (b) ranks on parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock and
the Class G Preferred Stock, and with any other class or series of capital Stock
of AIMCO, if the holders of such class of Stock or series and the Class G
Preferred Stock shall be entitled to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding-up in proportion to their
respective amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority one over the other ("Class H Parity
Stock") and (c) ranks junior to any class or series of capital Stock of AIMCO if
the holders of such class or series shall be entitled to the receipt of
dividends or amounts distributable upon liquidation, dissolution or winding-up
in preference or priority to the holders of the Class H Preferred Stock ("Class
H Senior Stock").
Holders of Class H Preferred Stock are entitled to receive cash dividends
at the rate of 9 1/2% per annum of the $25 liquidation preference (equivalent to
$2.375 per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing October 15, 1998. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO shall be made to or set apart for the holders of any shares of Class H
Junior Stock, the holders of Class H Preferred Stock shall be entitled to
receive a liquidation preference of $25 per share (the "Class H Liquidation
Preference"), plus an amount equal to all accumulated, accrued and unpaid
dividends to the date of final distribution to such holders; but such holders
shall not be entitled to any further payment. If proceeds available for
distribution shall be insufficient to pay the preference described above and any
liquidating payments on any other shares of any class or series of Class H
Parity Stock, then such proceeds shall be distributed among the holders of Class
H Preferred Stock and any such other Class H Parity Stock ratably in the same
proportion as the respective amount that would be payable on such Class H
Preferred Stock and any such other Class H Parity Stock if all amounts payable
thereon were paid in full.
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On and after August 14, 2003, AIMCO may redeem shares of Class H Preferred
Stock, in whole or in part, at a cash redemption price equal to 100% of the
Class H Liquidation Preference plus all accrued and unpaid dividends to the date
fixed for redemption. The Class H Preferred Stock has no stated maturity and
will not be subject to any sinking fund or mandatory redemption provisions.
Holders of shares of Class H Preferred Stock have no voting rights, except
that if distributions on Class H Preferred Stock or any series or class of Class
H Parity Stock shall be in arrears for six or more quarterly periods, the number
of directors constituting the AIMCO Board shall be increased by two and the
holders of Class H Preferred Stock (voting together as a single class with all
other shares of Class H Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class H Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
H Preferred Stock will be required to amend the Charter in any manner that would
adversely affect the rights of the holders of Class H Preferred Stock, and to
approve the issuance of any capital Stock that ranks senior to the Class H
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
There are ownership restrictions applicable to the Class H Preferred Stock
that are similar to those for the Class B Preferred Stock.
DESCRIPTION OF COMMON STOCK
GENERAL
The Charter authorizes the issuance of up to 510,750,000 shares of capital
Stock with a par value of $.01 per share, of which 486,027,500 shares were
classified as Class A Common Stock and 262,500 shares were classified as Class B
Common Stock as of October 1, 1998. As of October 1, 1998, there were 47,982,057
shares of Class A Common Stock issued and outstanding. In addition, up to
150,000 shares of Class A Common Stock have been reserved for issuance under
AIMCO's 1994 Stock Option Plan, up to 500,000 shares of Class A Common Stock
have been reserved for issuance under AIMCO's 1996 Stock Award and Incentive
Plan, and up to 500,000 shares of Class A Common Stock have been reserved for
issuance under AIMCO's Non-Qualified Stock Option Plan. Under AIMCO's 1997 Stock
Award and Incentive Plan, AIMCO may issue up to 10% of the shares of Class A
Common Stock outstanding as of the first day of the fiscal year during which any
award is made, but in no event more than 20,000,000 shares of Class A Common
Stock. The Class A Common Stock is traded on the NYSE under the symbol "AIV."
BankBoston, N.A. serves as transfer agent and registrar of the Class A Common
Stock. As of October 1, 1998, the Charter authorized 750,000 shares of Class B
Preferred Stock, all of which were issued and outstanding; 2,760,000 shares of
Class C Preferred Stock, of which 2,400,000 shares were issued and outstanding;
4,600,000 shares of Class D Preferred Stock, of which 4,200,000 shares were
issued and outstanding; 10,000,000 shares of Class E Preferred Stock, of which
up to 8,945,921 shares are expected to be issued as consideration for the
Insignia merger; 4,050,000 shares of Class G Preferred Stock, all of which
shares were issued and outstanding; and 2,300,000 shares of Class H Preferred
Stock, of which 2,000,000 shares were issued and outstanding. In addition, the
Charter authorizes 262,500 shares of Class B Common Stock, which number is
subject to reduction by the number of shares of Class B Common Stock that have
been converted into shares of Class A Common Stock. As of October 1, 1998,
162,500 shares of Class B Common Stock were issued and outstanding. See
"-- Class B Common Stock."
CLASS A COMMON STOCK
Holders of the Class A Common Stock are entitled to receive dividends, when
and as declared by the AIMCO Board, out of funds legally available therefor. The
holders of shares of Class A Common Stock, upon any liquidation, dissolution or
winding up of AIMCO, are entitled to receive ratably any assets remaining after
payment in full of all liabilities of AIMCO and the liquidation preferences of
preferred stock. The shares of Class A Common Stock possess ordinary voting
rights for the election of Directors and in respect of other
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corporate matters, each share entitling the holder thereof to one vote. Holders
of shares of Class A Common Stock do not have cumulative voting rights in the
election of Directors, which means that holders of more than 50% of the shares
of Class A Common Stock voting for the election of Directors can elect all of
the Directors if they choose to do so and the holders of the remaining shares
cannot elect any Directors. Holders of shares of Class A Common Stock do not
have preemptive rights, which means they have no right to acquire any additional
shares of Class A Common Stock that may be issued by AIMCO at a subsequent date.
RESTRICTIONS ON TRANSFER
For AIMCO to qualify as a REIT under the Code, not more than 50% in value
of its outstanding capital stock may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year and the shares of capital stock must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months or during a proportionate part of a shorter taxable year.
Because the AIMCO Board believes that it is essential for AIMCO to continue to
qualify as a REIT and to provide additional protection for AIMCO's stockholders
in the event of certain transactions, the AIMCO Board has adopted, and the
stockholders have approved, provisions of the Charter restricting the
acquisition of shares of Common Stock.
Subject to certain exceptions specified in the Charter, no holder may own,
or be deemed to own by virtue of various attribution and constructive ownership
provisions of the Internal Revenue Code and Rule 13d-3 under the Exchange Act,
more than 8.7% (or 15% in the case of certain pension trusts described in the
Internal Revenue Code, investment companies registered under the Investment
Company Act of 1940 and Mr. Considine) of the outstanding shares of Common
Stock. For purposes of calculating the amount of stock owned by a given
individual, the individual's Common Stock and Common OP Units are aggregated.
The AIMCO Board of Directors may waive the Ownership Limit if evidence
satisfactory to the AIMCO Board of Directors and AIMCO's tax counsel is
presented that such ownership will not then or in the future jeopardize AIMCO's
status as a REIT. However, in no event may such holder's direct or indirect
ownership of Common Stock exceed 9.8% of the total outstanding shares of Common
Stock. As a condition of such waiver, the AIMCO Board of Directors may require
opinions of counsel satisfactory to it and/or an undertaking from the applicant
with respect to preserving the REIT status of AIMCO. The foregoing restrictions
on transferability and ownership will not apply if the AIMCO Board of Directors
determines that it is no longer in the best interests of AIMCO to attempt to
qualify, or to continue to quality as a REIT and a resolution terminating
AIMCO's status as a REIT and amending the Charter to remove the foregoing
restrictions is duly adopted by the AIMCO Board of Directors and a majority of
AIMCO's stockholders. If shares of Common Stock in excess of the Ownership
Limit, or shares of Common Stock which would cause the REIT to be beneficially
owned by fewer than 100 persons, or which would result in AIMCO being "closely
held," within the meaning of Section 856(h) of the Internal Revenue Code, or
which would otherwise result in AIMCO failing to qualify as a REIT, are issued
or transferred to any person, such issuance or transfer shall be null and void
to the intended transferee, and the intended transferee would acquire no rights
to the stock. Shares of Common Stock transferred in excess of the Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Ownership Limit or other applicable limitation. Upon a sale of such shares
by the trustee, the interest of the charitable beneficiary will terminate, and
the sales proceeds would be paid, first, to the original intended transferee, to
the extent of the lesser of (a) such transferee's original purchase price (or
the original market value of such shares if purportedly acquired by gift or
devise) and (b) the price received by the trustee, and, second, any remainder to
the charitable beneficiary. In addition, shares of stock held in such trust are
purchasable by AIMCO for a 90-day period at a price equal to the lesser of the
price paid for the stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the stock on the date that AIMCO determines to purchase the
stock. The 90-day period commences on the date of the violative transfer or the
date that the AIMCO Board of Directors determines in good faith that a
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violative transfer has occurred, whichever is later. All certificates
representing shares of Common Stock bear a legend referring to the restrictions
described above.
All persons who own, directly or by virtue of the attribution provisions of
the Internal Revenue Code and Rule 13d-3 under the Securities Exchange Act of
1934, more than a specified percentage of the outstanding shares of Common Stock
must file a written statement or an affidavit with AIMCO containing the
information specified in the Charter within 30 days after January 1 of each
year. In addition, each stockholder shall upon demand be required to disclose to
AIMCO in writing such information with respect to the direct, indirect and
constructive ownership of shares as the AIMCO Board deems necessary to comply
with the provisions of the Internal Revenue Code applicable to a REIT or to
comply with the requirements of any taxing authority or governmental agency.
The ownership limitations may have the effect of precluding acquisition of
control of AIMCO by a third party unless the AIMCO Board of Directors determines
that maintenance of REIT status is no longer in the best interests of AIMCO.
CLASS B COMMON STOCK
In connection with the initial formation of AIMCO, Terry Considine, Peter
Kompaniez, Steven Ira and Robert P. Lacy (a former officer of AIMCO) acquired an
aggregate of 650,000 shares of Class B Common Stock. The Charter, which
initially authorized 750,000 shares of Class B Common Stock, was amended in June
1998 to authorize 262,500 shares of Class B Common Stock, of which 162,500
shares are issued and outstanding. The Class B Common Stock does not have voting
or dividend rights and, unless converted into Class A Common Stock, as described
below, is subject to repurchase by AIMCO as described below. As of December 31
of each of the years 1994 through 1998 (each, a "Year-End Testing Date"), a
number of the shares of Class B Common Stock outstanding as of such date (the
"Eligible Class B Shares") become eligible for automatic conversion (subject to
the Ownership Limit) into an equal number of shares of Class A Common Stock
(subject to adjustment upon the occurrence of certain events in respect of the
Class A Common Stock, including stock dividends, subdivisions, combinations and
reclassifications). Once Class B Common Stock has been converted into Class A
Common Stock, holders of such shares of converted Class A Common Stock will have
voting and dividend rights of Class A Common Stock generally. Once converted or
forfeited, the Class B Common Stock may not be reissued by AIMCO.
The Eligible Class B Shares convert to Class A Common Stock if (i) AIMCO's
Funds from Operations Per Share (as defined below) reaches certain annual and
cumulative growth targets and (ii) the average market price for a share of Class
A Common Stock for a 90 calendar day period beginning on any day on or after the
October 1 immediately preceding the relevant Year-End Testing Date equals or
exceeds a specified target price. "Funds from Operations Per Share" or "FFO Per
Share" means, for any period, (i) net income (loss), computed in accordance with
generally accepted accounting principles, excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures, less any
preferred stock dividend payments, divided by (ii) the sum of (a) the number of
shares of the Class A Common Stock outstanding on the last day of such period
(excluding any shares of the Class A Common Stock into which shares of the Class
B Common Stock shall have been converted as a result of the conversion of shares
of the Class B Common Stock on the last day of such period) and (b) the number
of shares of the Class A Common Stock issuable to acquire units of limited
partnership that (x) may be tendered for redemption in any limited partnership
in which AIMCO serves as general partner and (y) are outstanding on the last day
of such period.
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Set forth below for each of the remaining Year-End Testing Dates is (i) the
number of shares of Class B Common Stock that become Eligible Class B Shares as
of such date, (ii) the annual FFO Per Share growth target (as a percentage
increase in FFO Per Share from the prior year), (iii) the cumulative FFO Per
Share growth target (in FFO Per Share) and (iv) the average market price target:
<TABLE>
<CAPTION>
ANNUAL FFO AVERAGE
ELIGIBLE PER SHARE CUMULATIVE FFO MARKET
CLASS B GROWTH PER SHARE PRICE
YEAR-END TESTING DATE SHARES(1) TARGET GROWTH TARGET TARGET
--------------------- --------- ---------- -------------- -------
<S> <C> <C> <C> <C>
December 31, 1998....................... 162,500 8.5% $2.760 $26.373
</TABLE>
- ---------------
(1) Assumes that only the shares of Class B Common Stock outstanding as of
December 31, 1997 remain outstanding until converted into shares of Class A
Common Stock.
If the annual growth target is not met for a particular Year-End Testing
Date, the Eligible Class B Shares for that date may be converted as of a
subsequent Year-End Testing Date if all of the targets are met for that
subsequent Year-End Testing Date. Any Class B Common Stock that has not been
converted into Class A Common Stock following December 31, 1998 will be subject
to repurchase by AIMCO at a price of $0.10 per share. Class B Common Stock is
also subject to automatic conversion upon the occurrence of certain events,
including a change of control (as defined in the Charter). The AIMCO Board may
increase the number of shares which are eligible for conversion as of any
Year-End Testing Date and may, under certain circumstances, accelerate the
conversion of outstanding Class B Common Stock at such time and in such amount
as it may determine appropriate.
All of the 65,000 shares of Class B Common Stock eligible for conversion as
of the December 31, 1994 Year-End Testing Date, all of the 130,000 shares of
Class B Common Stock eligible for conversion as of the December 31, 1995
Year-End Testing Date, all of the 130,000 shares of Class B Common Stock
eligible for conversion as of December 31, 1996 and all of the 162,500 shares of
Class B Common Stock eligible for conversion as of December 31, 1997, have been
converted into shares of Class A Common Stock. As of December 31, 1997, the
outstanding Class B Common Stock was held as follows: 93,428 shares by Mr.
Considine, 41,438 shares by Mr. Kompaniez, 13,821 shares by Mr. Ira and 13,813
shares by Mr. Lacy.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting power
of the corporation's shares or an affiliate of the corporation who, at any time
within the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then-outstanding voting stock of
the corporation (an "Interested Stockholder") or an affiliate thereof are
prohibited for five years after the most recent date on which the Interested
Stockholder became an Interested Stockholder. Thereafter, any such business
combination must be recommended by the board of directors of the corporation and
approved by the affirmative vote of at least (a) 80% of the votes entitled to be
cast by holders of outstanding voting shares of the corporation, voting together
as a single voting group, and (b) two-thirds of the votes entitled to be cast by
holders of outstanding voting shares of the corporation other than shares held
by the Interested Stockholder or an affiliate of the Interested Stockholder with
whom the business combination is to be effected, unless, among other conditions,
the corporation's stockholders receive a minimum price (as defined in the MGCL)
for their shares and the consideration is received in cash or in the same form
as previously paid by the Interested Stockholder for its shares. For purposes of
determining whether a person is an Interested Stockholder, ownership of Common
OP Units will be treated as beneficial ownership of the shares of Common Stock
for which the Common OP Units may be redeemed. The business combination statute
could have the effect of discouraging offers to acquire AIMCO and of increasing
the difficulty of consummating any such offer. These provisions of the MGCL do
not apply, however, to business combinations that are approved or exempted by
the board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. The AIMCO Board has not passed
such a resolution.
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CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror or by officers or directors who
are employees of the corporation. "Control shares" are voting shares of stock
that, if aggregated with all other shares of stock previously acquired by that
person, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority or
(iii) a majority or more of all voting power. Control shares do not include
shares the acquiring person is then entitled to vote as a result of having
previously obtained stockholder approval.
A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions. A person who has made or proposes to make a
control share acquisition, upon satisfaction of certain conditions (including an
undertaking to pay expenses), may compel the corporation's board of directors to
call a special meeting of stockholders, to be held within 50 days of demand, to
consider the voting rights of the shares. If no request for a meeting is made,
the corporation may itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an "acquiring person statement" as required by the statute,
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares (except those for which voting rights have
previously been approved) for fair value determined, without regard to the
absence of voting rights, as of the date of the last control share acquisition
or of any meeting of stockholders at which the voting rights of such shares were
considered and not approved. If voting rights for control shares are approved at
a stockholders meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of the appraisal
rights may not be less than the highest price per share paid in the control
share acquisition, and certain limitations and restrictions otherwise applicable
to the exercise of dissenters' rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the corporation's
articles of incorporation or bylaws prior to the control share acquisition. No
such exemption appears in the Charter or in AIMCO's bylaws (the "Bylaws"). The
control share acquisition statute could have the effect of discouraging offers
to acquire AIMCO and of increasing the difficulty of consummating any such
offer.
DESCRIPTION OF OP UNITS
The following description sets forth certain general terms and provisions
of the OP Units and the AIMCO Operating Partnership Agreement. The AIMCO
Operating Partnership Agreement is included as Appendix B hereto, and this
description is qualified in its entirety by the terms thereof.
GENERAL
The AIMCO Operating Partnership is a limited partnership organized pursuant
to the provisions of the Delaware Revised Uniform Limited Partnership Act (as
amended from time to time, or any successor to such statute, the "Delaware LP
Act") and upon the terms and subject to the conditions set forth in the AIMCO
Operating Partnership Agreement. AIMCO GP, a Delaware corporation and a wholly
owned subsidiary of AIMCO, is the sole general partner of the AIMCO Operating
Partnership. Another wholly owned subsidiary of AIMCO, the Special Limited
Partner, is a limited partner in the AIMCO Operating Partnership. The term of
the AIMCO Operating Partnership commenced on May 16, 1994, and will continue
until December 31, 2093, unless the AIMCO Operating Partnership is dissolved
sooner pursuant to the provisions of the AIMCO Operating Partnership Agreement
or as otherwise provided by law.
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<PAGE> 51
PURPOSE AND BUSINESS
The purpose and nature of the AIMCO Operating Partnership is to conduct any
business, enterprise or activity permitted by or under the Delaware LP Act,
including, but not limited to, (i) to conduct the business of ownership,
construction, development and operation of multifamily rental apartment
communities, (ii) to enter into any partnership, joint venture, business trust
arrangement, limited liability company or other similar arrangement to engage in
any business permitted by or under the Delaware LP Act, or to own interests in
any entity engaged in any business permitted by or under the Delaware LP Act,
(iii) to conduct the business of providing property and asset management and
brokerage services, whether directly or through one or more partnerships, joint
ventures, subsidiaries, business trusts, limited liability companies or other
similar arrangements, and (iv) to do anything necessary or incidental to the
foregoing; provided, however, such business and arrangements and interests may
be limited to and conducted in such a manner as to permit AIMCO, in the sole and
absolute discretion of the AIMCO GP, at all times to be classified as a REIT.
MANAGEMENT BY THE AIMCO GP
Except as otherwise expressly provided in the AIMCO Operating Partnership
Agreement, all management powers over the business and affairs of the AIMCO
Operating Partnership are exclusively vested in the AIMCO GP. None of the
limited partners of the AIMCO Operating Partnership or any other person to whom
one or more OP Units have been transferred (each, an "Assignee") will take part
in the operations, management or control (within the meaning of the Delaware LP
Act) of the AIMCO Operating Partnership's business, transact any business in the
AIMCO Operating Partnership's name or have the power to sign documents for or
otherwise bind the AIMCO Operating Partnership. The AIMCO GP may not be removed
by the partners with or without cause, except with the consent of the AIMCO GP.
In addition to the powers granted a general partner of a limited partnership
under applicable law or that are granted to the AIMCO GP under any other
provision of the AIMCO Operating Partnership Agreement, the AIMCO GP, subject to
the other provisions of the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary or desirable by it to
conduct the business of the AIMCO Operating Partnership, to exercise all powers
of the AIMCO Operating Partnership and to effectuate the purposes of the AIMCO
Operating Partnership. The AIMCO Operating Partnership may incur debt or enter
into other similar credit, guarantee, financing or refinancing arrangements for
any purpose (including, without limitation, in connection with any acquisition
of properties) upon such terms as the AIMCO GP determines to be appropriate. The
AIMCO GP is authorized to execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating Partnership without any further
act, approval or vote of the partners.
Restrictions on AIMCO GP's Authority. The AIMCO GP may not take any action
in contravention of the AIMCO Operating Partnership Agreement. The AIMCO GP may
not, without the prior consent of the limited partners, undertake, on behalf of
the AIMCO Operating Partnership, any of the following actions or enter into any
transaction that would have the effect of such transactions: (i) except as
provided in the AIMCO Operating Partnership Agreement, amend, modify or
terminate the AIMCO Operating Partnership Agreement other than to reflect the
admission, substitution, termination or withdrawal of partners; (ii) make a
general assignment for the benefit of creditors or appoint or acquiesce in the
appointment of a custodian, receiver or trustee for all or any part of the
assets of the AIMCO Operating Partnership; (iii) institute any proceeding for
bankruptcy on behalf of the AIMCO Operating Partnership; or (iv) subject to
certain exceptions, approve or acquiesce to the transfer of the AIMCO Operating
Partnership interest of the AIMCO GP, or admit into the AIMCO Operating
Partnership any additional or successor general partners of the AIMCO Operating
Partnership.
Issuance of Additional OP Limited Partnership Interests. The AIMCO GP is
authorized to admit additional limited partners to the AIMCO Operating
Partnership from time to time, on terms and conditions and for such capital
contributions as may be established by the AIMCO GP in its reasonable
discretion. The net capital contribution need not be equal for all partners. No
action or consent by the limited partners is required in connection with the
admission of any additional limited partner. The AIMCO GP is expressly
authorized to cause the AIMCO Operating Partnership to issue additional
interests (i) upon the conversion, redemption or exchange of any debt, OP Units
or other securities issued by the AIMCO Operating
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<PAGE> 52
Partnership, (ii) for less than fair market value, so long as the AIMCO GP
concludes in good faith that such issuance is in the best interests of the AIMCO
GP and the AIMCO Operating Partnership, and (iii) in connection with any merger
of any other entity into the AIMCO Operating Partnership if the applicable
merger agreement provides that persons are to receive interests in the AIMCO
Operating Partnership in exchange for their interests in the entity merging into
the AIMCO Operating Partnership. Subject to Delaware law, any additional
partnership interests may be issued in one or more classes, or one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties as shall be
determined by the AIMCO GP, in its sole and absolute discretion without the
approval of any limited partners, and set forth in a written document thereafter
attached to and made an exhibit to the AIMCO Operating Partnership Agreement.
Without limiting the generality of the foregoing, the AIMCO GP shall have
authority to specify (a) the allocations of items of partnership income, gain,
loss, deduction and credit to each such class or series of partnership
interests; (b) the right of each such class or series of partnership interests
to share in distributions by the AIMCO Operating Partnership; (c) the rights of
each such class or series of partnership interests upon dissolution and
liquidation of the AIMCO Operating Partnership; (d) the voting rights, if any,
of each such class or series of partnership interests; and (e) the conversion,
redemption or exchange rights applicable to each such class or series of
partnership interests. Interests in the AIMCO Operating Partnership that have
distribution rights, or rights upon liquidation, winding up or dissolution, that
are superior or prior to the Common OP Units are Preferred OP Units. No person
will be admitted as an additional limited partner without the consent of the
AIMCO GP, which consent may be given or withheld in the AIMCO GP's sole and
absolute discretion.
MANAGEMENT LIABILITY AND INDEMNIFICATION
Notwithstanding anything to the contrary set forth in the AIMCO Operating
Partnership Agreement, the AIMCO GP is not liable to the AIMCO Operating
Partnership for losses sustained, liabilities incurred or benefits not derived
as a result of errors in judgment or mistakes of fact or law of any act or
omission if the AIMCO GP acted in good faith. The AIMCO Operating Partnership
Agreement provides for indemnification of AIMCO, or any director or officer of
AIMCO (in its capacity as the previous general partner of the AIMCO Operating
Partnership), the AIMCO GP, any officer or director of AIMCO GP or the AIMCO
Operating Partnership and such other persons as the AIMCO GP may designate from
and against all losses, claims, damages, liabilities, joint or several, expenses
(including legal fees), fines, settlements and other amounts incurred in
connection with any actions relating to the operations of the AIMCO Operating
Partnership, as set forth in the AIMCO Operating Partnership Agreement. The
Delaware LP Act provides that subject to the standards and restrictions, if any,
set forth in its partnership agreement, a limited partnership may, and shall
have the power to, indemnify and hold harmless any partner or other person from
and against any and all claims and demands whatsoever. It is the position of the
SEC that indemnification of directors and officers for liabilities arising under
the Securities Act of 1933 is against public policy and is unenforceable
pursuant to Section 14 of the Securities Act of 1933.
COMPENSATION AND FEES
The AIMCO GP does not receive compensation for its services as general
partner of the AIMCO Operating Partnership. However, the AIMCO GP is entitled to
payments, allocations and distributions in its capacity as general partner of
the AIMCO Operating Partnership. In addition, the AIMCO Operating Partnership is
responsible for all expenses incurred relating to the AIMCO Operating
Partnership's ownership of its assets and the operation of the AIMCO Operating
Partnership and reimburses the AIMCO GP for such expenses paid by the AIMCO GP.
The employees of the AIMCO Operating Partnership receive compensation for their
services.
FIDUCIARY RESPONSIBILITIES
The directors and officers of the AIMCO GP have fiduciary duties to manage
the AIMCO GP in a manner beneficial to AIMCO, as the sole stockholder of the
AIMCO GP. At the same time, the AIMCO GP, as general partner, has fiduciary
duties to manage the AIMCO Operating Partnership in a manner beneficial
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to the AIMCO Operating Partnership and its partners. The duties of the AIMCO GP,
as general partner, to the AIMCO Operating Partnership and its partners,
therefore, may come into conflict with the duties of the directors and officers
of the AIMCO GP to its sole stockholder, AIMCO.
Unless otherwise provided for in the relevant partnership agreement,
Delaware law generally requires a general partner of a Delaware limited
partnership to adhere to fiduciary duty standards under which it owes its
limited partners the highest duties of good faith, fairness and loyalty and
which generally prohibit such general partner from taking any action or engaging
in any transaction as to which it has a conflict of interest. The AIMCO
Operating Partnership Agreement expressly authorizes the AIMCO GP to enter into,
on behalf of the AIMCO Operating Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various affiliates of
the AIMCO Operating Partnership and the AIMCO GP, on such terms as the AIMCO GP,
in its sole and absolute discretion, believes are advisable. The latitude given
in the AIMCO Operating Partnership Agreement to the AIMCO GP in resolving
conflicts of interest may significantly limit the ability of a limited partner
to challenge what might otherwise be a breach of fiduciary duty. The AIMCO GP
believes, however, that such latitude is necessary and appropriate to enable it
to serve as the general partner of the AIMCO Operating Partnership without undue
risk of liability.
The AIMCO Operating Partnership Agreement expressly limits the liability of
the AIMCO GP by providing that the AIMCO GP, and its officers and directors will
not be liable or accountable in damages to the AIMCO Operating Partnership, the
limited partners or assignees for errors in judgment or mistakes of fact or law
or of any act or omission if the AIMCO GP or such director or officer acted in
good faith. In addition, the AIMCO Operating Partnership is required to
indemnify the AIMCO GP, its affiliates and their respective officers, directors,
employees and agents to the fullest extent permitted by applicable law, against
any and all losses, claims, damages, liabilities, joint or several, expenses,
judgments, fines and other actions incurred by the AIMCO GP or such other
persons, provided that the AIMCO Operating Partnership will not indemnify for
(i) willful misconduct or a knowing violation of the law or (ii) for any
transaction for which such person received an improper personal benefit in
violation or breach of any provision of the AIMCO Operating Partnership
Agreement.
The provisions of Delaware law that allow the common law fiduciary duties
of a general partner to be modified by a partnership agreement have not been
resolved in a court of law, and the AIMCO GP has not obtained an opinion of
counsel covering the provisions set forth in the AIMCO Operating Partnership
Agreement that purport to waive or restrict the fiduciary duties of the AIMCO GP
that would be in effect under common law were it not for the AIMCO Operating
Partnership Agreement. See "Risk Factors -- Risks Associated With an Investment
in OP Units -- Conflicts of Interest and Fiduciary Responsibility."
CLASS B PARTNERSHIP PREFERRED UNITS
On August 4, 1997, in connection with AIMCO's issuance of 750,000 shares of
Class B Preferred Stock, the AIMCO Operating Partnership issued 750,000 Class B
Partnership Preferred Units to the Special Limited Partner. The terms of the
Class B Partnership Preferred Units are substantially the same as the terms of
the Class B Preferred Stock. The Class B Partnership Preferred Units entitle the
Special Limited Partner to receive preferred quarterly cash distributions of
$1.78125 per unit or, if greater, the distributions then payable on Common OP
Units into which such Class B Partnership Preferred Units are convertible. On or
after August 4, 1998, upon the conversion of Class B Preferred Stock into Class
A Common Stock, a number of Class B Partnership Preferred Units equal to the
number of shares of Class B Preferred Stock so converted will be converted into
Common OP Units. The number of Common OP Units issued upon conversion of Class B
Partnership Preferred Units is determined by dividing the Class B Partnership
Preferred Unit's liquidation preference of $100 per unit by $30.45. In addition,
each Class B Partnership Preferred Unit has a priority in liquidation equal to
$100 per unit plus an amount equal to the accumulated, accrued and unpaid
dividends on a share of Class B Preferred Stock.
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CLASS C PARTNERSHIP PREFERRED UNITS
On December 23, 1997, in connection with AIMCO's issuance of 2,400,000
shares of Class C Preferred Stock, the AIMCO Operating Partnership issued
2,400,000 Class C Partnership Preferred Units to the Special Limited Partner.
The terms of the Class C Partnership Preferred Units are substantially the same
as the terms of the Class C Preferred Stock. The Class C Partnership Preferred
Units entitle the Special Limited Partner to receive preferred quarterly cash
distributions of $0.5625 per unit ($2.25 per annum). In addition, each Class C
Partnership Preferred Unit has a priority in liquidation equal to $25 per unit
plus an amount equal to the accumulated, accrued and unpaid dividends on a share
of Class C Preferred Stock.
CLASS D PARTNERSHIP PREFERRED UNITS
On February 19, 1998, in connection with AIMCO's issuance of 4,200,000
shares of Class D Preferred Stock, the AIMCO Operating Partnership issued
4,200,000 Class D Partnership Preferred Units to the Special Limited Partner.
The terms of the Class D Partnership Preferred Units are substantially the same
as the terms of the Class D Preferred Stock. The Class D Partnership Preferred
Units entitle the Special Limited Partner to receive preferred quarterly cash
distributions of $0.546875 ($2.1875 per annum). In addition, each Class D
Partnership Preferred Unit has a priority in liquidation equal to $25 per unit
plus an amount equal to the accumulated, accrued and unpaid dividends on a share
of Class D Preferred Stock.
CLASS E PARTNERSHIP PREFERRED UNITS
In connection with the Insignia Merger, AIMCO will issue up to 8,945,921
shares of Class E Preferred Stock. AIMCO will contribute assets formerly held by
Insignia to the AIMCO Operating Partnership in exchange for Class E Partnership
Preferred Units issued to the Special Limited Partner. The terms of the Class E
Partnership Preferred Units are substantially the same as the terms of the Class
E Preferred Stock. The Class E Partnership Preferred Units entitle the Special
Limited Partner to receive preferred quarterly distributions equal (on a per
unit basis) to the dividends paid on the AIMCO Class A Common Stock (on a per
share basis), and a special distribution of $50 million in the aggregate. Upon
payment of the special distribution, the Class E Partnership Preferred Units
automatically convert into an equal number of Common OP Units. Each Class E
Partnership Preferred Unit has a priority in liquidation equal to $1.00 per unit
plus an amount equal to the accumulated, accrued and unpaid dividends on a share
of Class E Preferred Stock.
CLASS F PARTNERSHIP PREFERRED UNITS
In connection with the Insignia Merger, AIMCO has assumed Insignia's
obligations under its 6 1/2% Convertible Subordinated Debentures due 2016 (the
"Convertible Debentures"), and the AIMCO Operating Partnership has issued Class
F Partnership Preferred Units to the Special Limited Partner that are
economically equivalent to the Convertible Debentures. The Convertible
Debentures bear interest at the rate of 6 1/2% per annum and are convertible
into shares of AIMCO Class E Preferred Stock at a price of $57.21. After the
conversion of Class E Preferred Stock into Class A Common Stock, the Convertible
Debentures will be convertible into shares of Class A Common Stock at a
conversion price that is adjusted for the $50 million dividend paid on the Class
E Preferred Stock. The Class F Partnership Preferred Units have a liquidation
value of $50 per Class F Partnership Preferred Unit, plus an amount per Class F
Partnership Unit equal to all accrued and unpaid interest on Convertible
Debentures in a principal amount of $50 to the date of final distribution to
holders of Class F Partnership Preferred Units (but such holders would not be
entitled to any further payment). Holders of Class F Partnership Preferred Units
are entitled to receive, on any date on which payments of interest or principal
are made on Convertible Debentures, distributions payable in cash in an amount
per Class F Partnership Preferred Unit equal to the interest and principal
payment made in respect of Convertible Debentures in a principal amount of $50
on such distribution date. Class F Partnership Preferred Units are redeemable by
the AIMCO Operating Partnership at any time that AIMCO redeems all or any of the
Convertible Debentures, in number equal to the quotient obtained by dividing the
aggregate principal amount of Convertible Debentures so redeemed by $50, at a
price per Class F Partnership Preferred Unit equal to the price paid by AIMCO to
redeem Convertible Debentures in a principal amount of $50. Upon any conversion
of Convertible Debentures into shares of AIMCO Class E Preferred Stock or Class
A Common
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Stock, a number of Class F Partnership Preferred Units equal to the quotient
obtained by dividing the aggregate principal amount of Convertible Debentures so
converted by $50 will be converted into Class E Partnership Preferred Units or
Partnership Common Units, respectively. The conversion ratio in effect from time
to time for such conversion of Class F Partnership Preferred Units into Class E
Partnership Preferred Units or Partnership Common Units will be equal to, and
automatically adjusted to reflect, the conversion ratio in effect from time to
time for the conversion of Convertible Debentures in a principal amount equal to
$50 into shares of AIMCO's Class E Preferred Stock or Class A Common Stock, as
the case may be. The Class F Partnership Preferred Units may be owned and held
solely by AIMCO GP or the Special Limited Partner.
CLASS G PARTNERSHIP PREFERRED UNITS
On July 15, 1998, in connection with AIMCO's issuance of 4,050,000 shares
of Class G Preferred Stock, the AIMCO Operating Partnership issued 4,050,000
Class G Partnership Preferred Units to the Special Limited Partner. The terms of
the Class G Partnership Preferred Units are substantially the same as the terms
of the Class G Preferred Stock. The Class G Partnership Preferred Units entitle
the Special Limited Partner to receive preferred quarterly cash distributions of
$0.5859375 ($2.34375 per annum). In addition, each Class G Partnership Preferred
Unit has a priority in liquidation equal to $25 per unit plus an amount equal to
the accumulated, accrued and unpaid dividends on a share of Class G Preferred
Stock.
CLASS H PARTNERSHIP PREFERRED UNITS
On August 11, 1998, in connection with AIMCO's issuance of 2,000,000 shares
of Class H Preferred Stock, the AIMCO Operating Partnership issued 2,000,000
Class H Partnership Preferred Units to the Special Limited Partner. The terms of
the Class H Partnership Preferred Units are substantially the same as the terms
of the Class H Preferred Stock. The Class H Partnership Preferred Units entitle
the Special Limited Partner to receive preferred quarterly cash distributions of
$0.59375 ($2.375 per annum). In addition, each Class H Partnership Preferred
Unit has a priority in liquidation equal to $25 per unit plus an amount equal to
the accumulated, accrued and unpaid dividends on a share of Class H Preferred
Stock.
HIGH PERFORMANCE UNITS
In January 1998, the AIMCO Operating Partnership sold an aggregate of
15,000 High Performance Units to a joint venture formed by fourteen of AIMCO's
officers and to three of AIMCO's independent directors, Messrs. Martin, Rhodes
and Smith. Holders of High Performance Units have no rights to receive
distributions or allocations of income or loss, or to redeem their High
Performance Units prior to the Valuation Date that is the earlier of (i) January
1, 2001, or (ii) the date on which a change of control (as defined in the AIMCO
Operating Partnership Agreement) occurs. If, on the Valuation Date, the
cumulative Total Return of the Class A Common Stock during the Measurement
Period exceeds the Minimum Return, then, on and after the Valuation Date,
holders of the 15,000 High Performance Units will be entitled to receive
distributions and allocations of income and loss from the AIMCO Operating
Partnership in the same amounts and at the same times (subject to certain
exceptions upon liquidation of the AIMCO Operating Partnership) as would holders
of a number of Common OP Units equal to the quotient obtained by dividing (i)
the product of (A) 15% of the amount by which the cumulative Total Return of the
Class A Common Stock over the Measurement Period exceeds the greater of 115% of
the peer group index or the Minimum Return, multiplied by (B) the weighted
average market value of AIMCO's equity capitalization (including Class A Common
Stock and Common OP Units) by (ii) the market value of one share of Class A
Common Stock on the Valuation Date. If, on the Valuation Date, the cumulative
Total Return of the Class A Common Stock does not satisfy these criteria, then,
on and after the Valuation Date, holders of the 15,000 High Performance Units
will be entitled to receive distributions and allocations of income and loss
from the AIMCO Operating Partnership in the same amounts and at the same times
(subject to certain exceptions upon a liquidation of the AIMCO Operating
Partnership) as would holders of 150 Common OP Units. For purposes of
determining the market value of Class A Common Stock or Common OP Units as of
any date, the average closing price of the Class A Common Stock for the 20
trading days immediately preceding such date
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is used. It is expected that the Morgan Stanley REIT Index, a
capitalization-weighted index with dividends reinvested of the most actively
traded REITs, will be used as the peer group index for purposes of the High
Performance Units.
Upon the occurrence of a change of control, any holder of High Performance
Units may, subject to certain restrictions, require the AIMCO Operating
Partnership to redeem all or a portion of the High Performance Units held by
such party in exchange for (i) a cash payment per unit equal to the estimated
proceeds that a holder of one unit would be entitled to receive in the event of
a liquidation of the AIMCO Operating Partnership, or (ii) a number of shares of
Class A Common Stock with a value equal to such cash payment. The AIMCO
Operating Partnership may elect, in its sole discretion, to pay cash or direct
AIMCO to issue shares to satisfy any such redemption.
DISTRIBUTIONS
Preferred OP Units. Holders of Preferred OP Units to be issued hereunder
will have rights to distributions as set forth in the Prospectus Supplement.
With respect to rights of holders of Class B Partnership Preferred Units, Class
C Partnership Preferred Units, Class D Partnership Preferred Units, Class E
Partnership Preferred Units, Class F Partnership Preferred Units, Class G
Partnership Preferred Units and Class H Partnership Preferred Units, see
"-- Class B Partnership Preferred Units; -- Class C Partnership Preferred Units;
- -- Class D Partnership Preferred Units; -- Class E Partnership Preferred Units;
- -- Class F Partnership Preferred Units; -- Class G Partnership Preferred Units;
and -- Class H Partnership Preferred Units."
High Performance Units. On and after the Valuation Date, holders of High
Performance Units may be entitled to receive distributions in accordance with
the terms of the High Performance Units. See "-- High Performance Units."
Common OP Units. Subject to the rights of holders of any outstanding
Preferred OP Units, the AIMCO Operating Partnership Agreement requires the AIMCO
GP to cause the AIMCO Operating Partnership to distribute quarterly all, or such
portion as the AIMCO GP may in its sole and absolute discretion determine, of
Available Cash (as defined in the AIMCO Operating Partnership Agreement)
generated by the AIMCO Operating Partnership during such quarter to the AIMCO
GP, the Special Limited Partner and the holders of Common OP Units ("Common OP
Unitholders") on the record date established by the AIMCO GP with respect to
such quarter, in accordance with their respective interests in the AIMCO
Operating Partnership on such record date. Holders of any other Preferred OP
Units issued in the future may have priority over the AIMCO GP, the Special
Limited Partner and holders of Common OP Units with respect to distributions of
Available Cash, distributions upon liquidation or other distributions.
Distributions payable with respect to any interest in the AIMCO Operating
Partnership that was not outstanding during the entire quarterly period in
respect of which any distribution is made will be prorated based on the portion
of the period that such interest was outstanding. The AIMCO GP in its sole and
absolute discretion may distribute to the OP Unitholders Available Cash on a
more frequent basis and provide for an appropriate record date. The AIMCO
Operating Partnership Agreement requires the AIMCO GP to take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with AIMCO's qualification as a REIT, to cause the AIMCO Operating Partnership
to distribute sufficient amounts to enable the AIMCO GP to transfer funds to
AIMCO and enable AIMCO to pay stockholder dividends that will (i) satisfy the
requirements (the "REIT Requirements") for qualifying as a REIT under the
Internal Revenue Code, and the Treasury Regulations and (ii) avoid any federal
income or excise tax liability of AIMCO.
No Common OP Unitholder has any right to demand or receive property other
than cash as provided in the AIMCO Operating Partnership Agreement. The AIMCO GP
may determine, in its sole and absolute discretion, to make a distribution in
kind of assets of the AIMCO Operating Partnership to the OP Unitholders, and
such assets will be distributed in such a fashion as to ensure that the fair
market value is distributed and allocated in accordance with the AIMCO Operating
Partnership Agreement.
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Subject to the rights of holders of any outstanding Preferred OP Units, net
proceeds from the sale or other disposition of all or substantially all of the
assets of the AIMCO Operating Partnership or a related series of transactions
that, taken together, result in the sale or other disposition of all or
substantially all of the assets of the AIMCO Operating Partnership (a
"Terminating Capital Transaction"), and any other cash received or reductions in
reserves made after commencement of the liquidation of the AIMCO Operating
Partnership, will be distributed to the OP Unitholders in accordance with the
AIMCO Operating Partnership Agreement.
The AIMCO Operating Partnership Agreement prohibits the AIMCO Operating
Partnership and the AIMCO GP, on behalf of the AIMCO Operating Partnership, from
making a distribution to any OP Unitholder on account of its interest in OP
Units if such distribution would violate Section 17-607 of the Delaware LP Act
or other applicable law.
ALLOCATIONS OF NET INCOME AND NET LOSS
Preferred OP Units. With respect to the Class B Partnership Preferred
Units, the Class C Partnership Preferred Units, the Class D Partnership
Preferred Units, the Class E Partnership Preferred Units, the Class F
Partnership Preferred Units, the Class G Partnership Preferred Units, the Class
H Partnership Preferred Units and any similar class of Preferred OP Unit that
may be subsequently issued, gross income and, if necessary, gain will be
allocated to the holders of the Preferred OP Units for any fiscal year (and, if
necessary, subsequent fiscal years) to the extent that the holders of the
Preferred OP Units receive a distribution on any Preferred OP Units (other than
an amount included in any redemption of Preferred OP Units). If any Preferred OP
Units are redeemed, for the fiscal year that includes such redemption (and, if
necessary, for subsequent fiscal years) (i) gross income and gain (in such
relative proportions as the AIMCO GP in its discretion will determine) will be
allocated to the holders of such class of Preferred OP Units to the extent that
the redemption amounts paid or payable with respect to the Preferred OP Units so
redeemed exceeds the aggregate capital contributions (net of liabilities assumed
or taken subject to by the AIMCO Operating Partnership) per Preferred OP Unit
allocable to the Preferred OP Units so redeemed and (ii) deductions and losses
(in such relative proportions as the AIMCO GP in its discretion will determine)
will be allocated to the holders of such class of Preferred OP Units to the
extent that the aggregate Capital Contributions (net of liabilities assumed or
taken subject to by the AIMCO Operating Partnership) per Preferred OP Unit
allocable to the Preferred OP Units so redeemed exceeds the redemption amount
paid or payable with respect to the Preferred OP Units so redeemed.
High Performance Units. On and after the Valuation Date, holders of High
Performance Units may be allocated income and loss in accordance with the terms
of the High Performance Units. See "-- High Performance Units."
Common OP Units. Net Income (as defined in the AIMCO Operating Partnership
Agreement) and Net Loss (as defined in the AIMCO Operating Partnership
Agreement) of the AIMCO Operating Partnership will be determined and allocated
with respect to each fiscal year of the AIMCO Operating Partnership as of the
end of each such year. Except as otherwise provided in the AIMCO Operating
Partnership Agreement, an allocation to a Common OP Unitholder of a share of Net
Income or Net Loss will be treated as an allocation of the same share of each
item of income, gain, loss or deduction that is taken into account in computing
Net Income or Net Loss. Except as otherwise provided in the AIMCO Operating
Partnership Agreement and subject to the terms of any outstanding Partnership
Preferred Units, Net Income and Net Loss will be allocated to the holders of
Common OP Units in accordance with their respective Common OP Units at the end
of each fiscal year. The AIMCO Operating Partnership Agreement contains
provisions for special allocations intended to comply with certain regulatory
requirements, including the requirements of Treasury Regulations Sections
1.704-1(b) and 1.704-2. Except as otherwise provided in the AIMCO Operating
Partnership Agreement and subject to the terms of any outstanding Preferred OP
Units, for income tax purposes under the Internal Revenue Code and the Treasury
Regulations, each Partnership item of income, gain, loss and deduction will be
allocated among the Common OP Unitholders in the same manner as its correlative
item of "book" income, gain, loss or deduction is allocated pursuant to the
AIMCO Operating Partnership Agreement.
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WITHHOLDING
The AIMCO Operating Partnership is authorized to withhold from or pay on
behalf of or with respect to each limited partner any amount of federal, state,
local or foreign taxes that the AIMCO GP determines that the AIMCO Operating
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such limited partner pursuant to the AIMCO
Operating Partnership Agreement.
RETURN OF CAPITAL
No limited partner is entitled to interest on its capital contribution or
on such limited partner's capital account. Except (i) pursuant to the rights of
redemption set forth in the AIMCO Operating Partnership Agreement, (ii) as
provided by law, or (iii) pursuant to the terms of any outstanding Preferred OP
Units, no limited partner has any right to demand or receive the withdrawal or
return of its capital contribution from the AIMCO Operating Partnership, except
to the extent of distributions made pursuant to the AIMCO Operating Partnership
Agreement or upon termination of the AIMCO Operating Partnership. Except to the
extent otherwise expressly provided in the AIMCO Operating Partnership Agreement
and subject to the terms of any outstanding Preferred OP Units, no limited
partner or assignee will have priority over any other limited partner or
assignee either as to the return of capital contributions or as to profits,
losses or distributions.
REDEMPTION RIGHTS
Preferred OP Units. Holders of Preferred OP Units to be issued hereunder
will have rights to redemption as set forth in the applicable Prospectus
Supplement. With respect to rights of holders of Class B Partnership Preferred
Units, Class C Partnership Preferred Units, Class D Partnership Preferred Units,
Class E Partnership Preferred Units, Class F Partnership Preferred Units, Class
G Partnership Preferred Units and Class H Partnership Preferred Units, see
"-- Class B Partnership Preferred Units; -- Class C Partnership Preferred Units;
- -- Class D Partnership Preferred Units; -- Class E Partnership Preferred Units;
- -- Class F Partnership Preferred Units; and -- Class H Partnership Preferred
Units."
High Performance Units. In the event of a change of control, holders of
High Performance Units will have redemption rights similar to those of holders
of Common OP Units. See "-- High Performance Units."
Common OP Units. After the first anniversary of becoming a holder of Common
OP Units, each Common OP Unitholder and certain assignees have the right,
subject to the terms and conditions set forth in the AIMCO Operating Partnership
Agreement, to require the AIMCO Operating Partnership to redeem all or a portion
of the Common OP Units held by such party in exchange for shares of Class A
Common Stock, on a one-for-one basis, or a cash amount equal to the value of
such shares. On or before the close of business on the fifth business day after
the AIMCO GP receives a notice of redemption, the AIMCO Operating Partnership
may, in its sole and absolute discretion but subject to the restrictions on the
ownership of Class A Common Stock imposed under the AIMCO Charter and the
transfer restrictions and other limitations thereof, elect to cause AIMCO to
acquire some or all of the tendered Common OP Units from the tendering party in
exchange for Class A Common Stock, based on an exchange ratio of one share of
Class A Common Stock for each Common OP Unit, subject to adjustment as provided
in the AIMCO Operating Partnership Agreement.
PARTNERSHIP RIGHT TO CALL COMMON OP UNITS
Notwithstanding any other provision of the AIMCO Operating Partnership
Agreement, on and after the date on which the aggregate percentage interests of
the limited partners, other than the Special Limited Partner, are less than one
percent (1%), the AIMCO Operating Partnership will have the right, but not the
obligation, from time to time and at any time to redeem any and all outstanding
limited partner interests (other than the Special Limited Partner's interest) in
the AIMCO Operating Partnership by treating any
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limited partner as if such limited partner had tendered for redemption pursuant
to the AIMCO Operating Partnership Agreement the amount of Common OP Units
specified by the AIMCO GP, in its sole and absolute discretion, by notice to the
limited partner.
TRANSFERS AND WITHDRAWALS
Restrictions on Transfer. The AIMCO Operating Partnership Agreement
restricts the transferability of OP Units. Any transfer or purported transfer of
an OP Unit not made in accordance with the AIMCO Operating Partnership Agreement
will be null and void ab initio. Until the expiration of one year from the date
on which a limited partner acquired OP Units, subject to certain exceptions,
such limited partner may not transfer all or any portion of its OP Units to any
transferee without the consent of the AIMCO GP, which consent may be withheld in
its sole and absolute discretion. After the expiration of one year from the date
on which a limited partner acquired OP Units, such limited partner has the right
to transfer all or any portion of its OP Units to any person, subject to the
satisfaction of certain conditions specified in the AIMCO Operating Partnership
Agreement, including the AIMCO GP's right of first refusal. It is a condition to
any transfer (regardless of whether such transfer is effected before or after
the one year holding period) that the transferee assumes by operation of law or
express agreement all of the obligations of the transferor limited partner under
the AIMCO Operating Partnership Agreement with respect to such OP Units, and no
such transfer (other than pursuant to a statutory merger or consolidation
wherein all obligations and liabilities of the transferor partner are assumed by
a successor corporation by operation of law) will relieve the transferor partner
of its obligations under the AIMCO Operating Partnership Agreement without the
approval of the AIMCO GP, in its sole and absolute discretion.
In connection with any transfer of OP Units, the AIMCO GP will have the
right to receive an opinion of counsel reasonably satisfactory to it to the
effect that the proposed transfer may be effected without registration under the
Securities Act of 1933 and will not otherwise violate any federal or state
securities laws or regulations applicable to the AIMCO Operating Partnership or
the OP Units transferred.
No transfer by a limited partner of its OP Units (including any redemption
or any acquisition of OP Units by the AIMCO GP or by the AIMCO Operating
Partnership) may be made to any person if (i) in the opinion of legal counsel
for the AIMCO Operating Partnership, it would result in the AIMCO Operating
Partnership being treated as an association taxable as a corporation, or (ii)
such transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Internal Revenue Code.
Substituted Limited Partners. No limited partner will have the right to
substitute a transferee as a limited partner in its place. A transferee of the
interest of a limited partner may be admitted as a substituted limited partner
only with the consent of the AIMCO GP, which consent may be given or withheld by
the AIMCO GP in its sole and absolute discretion. If the AIMCO GP, in its sole
and absolute discretion, does not consent to the admission of any permitted
transferee as a substituted limited partner, such transferee will be considered
an assignee for purposes of the AIMCO Operating Partnership Agreement. An
assignee will be entitled to all the rights of an assignee of a limited
partnership interest under the Delaware LP Act, including the right to receive
distributions from the AIMCO Operating Partnership and the share of Net Income,
Net Losses and other items of income, gain, loss, deduction and credit of the
AIMCO Operating Partnership attributable to the OP Units assigned to such
transferee and the rights to transfer the OP Units provided in the AIMCO
Operating Partnership Agreement, but will not be deemed to be a limited partner
for any other purpose under the AIMCO Operating Partnership Agreement, and will
not be entitled to effect a consent or vote with respect to such OP Units on any
matter presented to the limited partners for approval (such right to consent or
vote, to the extent provided in this Agreement or under the Delaware LP Act,
fully remaining with the transferor limited partner).
Withdrawals. No limited partner may withdraw from the AIMCO Operating
Partnership other than as a result of a permitted transfer of all of such
limited partner's OP Units in accordance with the AIMCO Operating Partnership
Agreement, with respect to which the transferee becomes a substituted limited
partner, or pursuant to a redemption (or acquisition by AIMCO) of all of such
limited partner's OP Units.
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Restrictions on the General Partner. The AIMCO GP may not transfer any of
its general partner interest or withdraw from the AIMCO Operating Partnership
unless (i) the limited partners consent or (ii) immediately after a merger of
the AIMCO GP into another entity, substantially all of the assets of the
surviving entity, other than the general partnership interest in the AIMCO
Operating Partnership held by the AIMCO GP, are contributed to the AIMCO
Operating Partnership as a capital contribution in exchange for OP Units.
ISSUANCE OF CAPITAL STOCK BY AIMCO
Pursuant to the AIMCO Operating Partnership Agreement, upon the issuance of
its capital stock, AIMCO is generally obligated to contribute the cash proceeds
or other consideration received from such issuance to the AIMCO Operating
Partnership in exchange for, in the case of Class A Common Stock, Common OP
Units, or in the case of an issuance of Preferred Stock, Preferred OP Units with
designations, preferences and other rights, terms and provisions that are
substantially the same as the designations, preferences and other rights, terms
and provisions of such Preferred Stock.
DILUTION
The AIMCO GP has the power, without the consent of the limited partners, to
cause the AIMCO Operating Partnership to issue additional Common OP Units and
Preferred OP Units. Any such issuance may dilute the interests of existing OP
Unitholders. In addition, the terms of the Preferred OP Units entitle the
holders thereof to receive preferential distributions of cash and a priority in
liquidation, as well as certain class voting rights.
AMENDMENT OF THE AIMCO OPERATING PARTNERSHIP AGREEMENT
By the AIMCO GP Without the Consent of the Limited Partners. The AIMCO GP
has the power, without the consent of the limited partners, to amend the AIMCO
Operating Partnership Agreement as may be required to facilitate or implement
any of the following purposes: (1) to add to the obligations of the AIMCO GP or
surrender any right or power granted to the AIMCO GP or any affiliate of the
AIMCO GP for the benefit of the limited partners; (2) to reflect the admission,
substitution or withdrawal of partners or the termination of the AIMCO Operating
Partnership in accordance with the AIMCO Operating Partnership Agreement; (3) to
reflect a change that is of an inconsequential nature and does not adversely
affect the limited partners in any material respect, or to cure any ambiguity,
correct or supplement any provision in the AIMCO Operating Partnership Agreement
not inconsistent with law or with other provisions, or make other changes with
respect to matters arising under the AIMCO Operating Partnership Agreement that
will not be inconsistent with law or with the provisions of the AIMCO Operating
Partnership Agreement; (4) to satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law; (5) to reflect such changes
as are reasonably necessary for AIMCO to maintain its status as a REIT; and (6)
to modify the manner in which capital accounts are computed (but only to the
extent set forth in the definition of "Capital Account" in the AIMCO Operating
Partnership Agreement or contemplated by the Internal Revenue Code or the
Treasury Regulations).
With the Consent of the Limited Partners. With the exception of the
circumstances described above whereby the AIMCO GP may, without the consent of
the limited partners, amendments to the AIMCO Operating Partnership Agreement
require the limited partners' consent. Amendments to the AIMCO Operating
Partnership Agreement may be proposed by the AIMCO GP or by limited partners
holding a majority of the outstanding Common OP Units, excluding the Special
Limited Partner (a "Majority in Interest"). Following such proposal, the AIMCO
GP will submit any proposed amendment to the limited partners. The AIMCO GP will
seek the written consent of the limited partners on the proposed amendment or
will call a meeting to vote thereon and to transact any other business that the
AIMCO GP may deem appropriate. For purposes of obtaining a written consent, the
AIMCO GP may require a written response within a reasonable specified time, but
not less than fifteen (15) days, and failure to respond in such time period
shall constitute a consent that is consistent with the AIMCO GP's recommendation
with respect to the
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proposal, provided, however, that an action shall become effective at such time
as requisite consents are received even if prior to such specified time.
PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS
Meetings of the partners may be called by the AIMCO GP and will be called
upon the receipt by the AIMCO GP of a written request by a Majority in Interest
of the limited partners. Notice of any such meeting will be given to all
partners not less than seven (7) days nor more than thirty (30) days prior to
the date of such meeting. Partners may vote in person or by proxy at such
meeting. Each meeting of partners will be conducted by the AIMCO GP or such
other person as the AIMCO GP may appoint pursuant to such rules for the conduct
of the meeting as the AIMCO GP or such other person deems appropriate in its
sole and absolute discretion. Any action required or permitted to be taken at a
meeting of the partners may be taken without a meeting if a written consent
setting forth the action so taken is signed by partners holding a majority of
outstanding Common OP Units (or such other percentage as is expressly required
by the AIMCO Operating Partnership Agreement for the action in question). Such
consent may be in one instrument or in several instruments, and shall have the
same force and effect as a vote of the partners holding a majority of
outstanding Common OP Units (or such other percentage as is expressly required
by the AIMCO Operating Partnership Agreement for the action in question). Such
consent shall be filed with the AIMCO GP. An action so taken shall be deemed to
have been taken at a meeting held on the effective date so certified.
RECORDS AND ACCOUNTING; FISCAL YEAR
The AIMCO Operating Partnership Agreement requires the AIMCO GP to keep or
cause to be kept at the principal office of the AIMCO Operating Partnership
those records and documents required to be maintained by the Delaware LP Act and
other books and records deemed by the AIMCO GP to be appropriate with respect to
the AIMCO Operating Partnership's business. The books of the AIMCO Operating
Partnership will be maintained, for financial and tax reporting purposes, on an
accrual basis in accordance with generally accepted accounting principles, or on
such other basis as the AIMCO GP determines to be necessary or appropriate. To
the extent permitted by sound accounting practices and principles, the AIMCO
Operating Partnership, the AIMCO GP and AIMCO may operate with integrated or
consolidated accounting records, operations and principles. The fiscal year of
the AIMCO Operating Partnership is the calendar year.
REPORTS
As soon as practicable, but in no event later than one hundred five (105)
days after the close of each calendar quarter and each fiscal year, the AIMCO GP
will cause to be mailed to each limited partner, of record as of the last day of
the calendar quarter or as of the close of the fiscal year, as the case may be,
a report containing financial statements of the AIMCO Operating Partnership, or
of AIMCO if such statements are prepared solely on a consolidated basis with
AIMCO, for such calendar quarter or fiscal year, as the case may be, presented
in accordance with generally accepted accounting principles, and such other
information as may be required by applicable law or regulation or as the AIMCO
GP determines to be appropriate. Statements included in quarterly reports are
not audited. Statements included in annual reports are audited by a nationally
recognized firm of independent public accountants selected by the AIMCO GP.
TAX MATTERS
The AIMCO GP is the "tax matters partner" of the AIMCO Operating
Partnership for federal income tax purposes. The tax matters partner is
authorized, but not required, to take certain actions on behalf of the AIMCO
Operating Partnership with respect to tax matters. In addition, the AIMCO GP
will arrange for the preparation and timely filing of all returns with respect
to the AIMCO Operating Partnership's income, gains, deductions, losses and other
items required of the AIMCO Operating Partnership for federal and state income
tax purposes and will use all reasonable effort to furnish, within ninety (90)
days of the close of each taxable year, the tax information reasonably required
by limited partners for federal and state income tax reporting
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purposes. The limited partners will promptly provide the AIMCO GP with such
information as may be reasonably requested by the AIMCO GP from time to time.
DISSOLUTION AND WINDING UP
Dissolution. The AIMCO Operating Partnership will dissolve, and its affairs
will be wound up, upon the first to occur of any of the following (each a
"Liquidating Event") (i) December 31, 2093; (ii) an event of withdrawal, as
defined in the Delaware LP Act (including, without limitation, bankruptcy), of
the sole general partner unless, within ninety (90) days after the withdrawal, a
"majority in interest" (as such phrase is used in Section 17-801(3) of the
Delaware LP Act) of the remaining partners agree in writing, in their sole and
absolute discretion, to continue the business of the AIMCO Operating Partnership
and to the appointment, effective as of the date of withdrawal, of a successor
general partner; (iii) an election to dissolve the AIMCO Operating Partnership
made by the general partner in its sole and absolute discretion, with or without
the consent of the limited partners; (iv) entry of a decree of judicial
dissolution of the AIMCO Operating Partnership pursuant to the provisions of the
Delaware LP Act; (v) the occurrence of a Terminating Capital Transaction; or
(vi) the redemption (or acquisition by AIMCO, the AIMCO GP and/or the Special
Limited Partner) of all Common OP Units other than Common OP Units held by the
AIMCO GP or the Special Limited Partner.
Winding Up. Upon the occurrence of a Liquidating Event, the AIMCO Operating
Partnership will continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets and satisfying the claims of its
creditors and partners. The AIMCO GP (or, in the event that there is no
remaining AIMCO GP or the AIMCO GP has dissolved, become bankrupt within the
meaning of the Delaware LP Act or ceased to operate, any person elected by a
Majority in Interest of the limited partners) will be responsible for overseeing
the winding up and dissolution of the AIMCO Operating Partnership and will take
full account of the AIMCO Operating Partnership's liabilities and property, and
the AIMCO Operating Partnership's property will be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
(which may, to the extent determined by the AIMCO GP, include Class A Common
Stock) will be applied and distributed in the following order: (i) first, to the
satisfaction of all of the AIMCO Operating Partnership's debts and liabilities
to creditors other than the partners and their assignees (whether by payment or
the making of reasonable provision for payment thereof); (ii) second, to the
satisfaction of all the AIMCO Operating Partnership's debts and liabilities to
the general partner (whether by payment or the making of reasonable provision
for payment thereof), including, but not limited to, amounts due as
reimbursements under the AIMCO Operating Partnership Agreement; (ii) third, to
the satisfaction of all of the AIMCO Operating Partnership's debts and
liabilities to the other partners and any assignees (whether by payment or the
making of reasonable provision for payment thereof); (iv) fourth, to the
satisfaction of all liquidation preferences of outstanding Preferred OP Units,
if any, and (v) the balance, if any, to the AIMCO GP, the limited partners and
any assignees in accordance with and in proportion to their positive capital
account balances, after giving effect to all contributions, distributions and
allocations for all periods.
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COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND AIMCO
Generally, the nature of an investment in the Common OP Units is
substantially equivalent economically to an investment in the Class A Common
Stock. The AIMCO Operating Partnership makes quarterly distributions to holders
of Common OP Units (on a per unit basis) that generally are equal to the
dividends paid on the Class A Common Stock (on a per share basis). However, such
distributions will not necessarily continue to be equal to such dividends.
Common OP Unitholders generally share in the risks and rewards of ownership in
the enterprise being conducted by AIMCO (through the AIMCO Operating
Partnership). However, there are some differences between ownership of Common OP
Units and ownership of Class A Common Stock, some of which may be material to
investors.
The information below highlights a number of the significant differences
between the AIMCO Operating Partnership and AIMCO relating to, among other
things, form of organization, permitted investments, policies and restrictions,
management structure, compensation and fees, investor rights and federal income
taxation, and compares certain legal rights associated with the ownership of
Common OP Units and Class A Common Stock, respectively. These comparisons are
intended to assist OP Unitholders in understanding how their investment will be
changed if their Common OP Units are exchanged for Class A Common Stock. COMMON
OP UNITHOLDERS SHOULD CAREFULLY REVIEW THE BALANCE OF THIS PROSPECTUS AND THE
REGISTRATION STATEMENT AND THE EXHIBITS THERETO OF WHICH THIS PROSPECTUS IS A
PART AND ANY APPLICABLE PROSPECTUS SUPPLEMENT FOR ADDITIONAL IMPORTANT
INFORMATION ABOUT THE COMPANY.
AIMCO OPERATING PARTNERSHIP AIMCO
Form of Organization and Assets Owned
<TABLE>
<S> <C>
The AIMCO Operating Partnership is organized as a AIMCO is a Maryland corporation. AIMCO has elected to
Delaware limited partnership. The AIMCO Operating be taxed as a REIT under the Internal Revenue Code,
Partnership owns interests (either directly or through commencing with its taxable year ended December 31,
subsidiaries) in the apartment properties. 1994, and intends to maintain its election as a REIT.
With certain limited exceptions, AIMCO's only
significant assets are its equity interests in the
AIMCO GP and the Special Limited Partner, which in turn
collectively hold a controlling interest in the AIMCO
Operating Partnership.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
The term of the AIMCO Operating Partnership continues AIMCO has a perpetual existence, unless liquidated or
until December 31, 2093, unless the AIMCO Operating dissolved.
Partnership is dissolved sooner pursuant to the terms
of the AIMCO Operating Partnership Agreement or as
provided by law. See "Description of OP
Units -- General" and "Description of OP
Units -- Dissolution and Winding Up."
</TABLE>
Purpose and Permitted Activities/Investments
<TABLE>
<S> <C>
The purpose of the AIMCO Operating Partnership is to Under its Charter, AIMCO may engage in any lawful
conduct any business that may be lawfully conducted by activity permitted to be engaged in by a Maryland
a limited partnership organized pursuant to the corporation pursuant to Maryland law. The Charter
Delaware LP Act, provided that such business is to be prohibits the AIMCO Board of Directors from taking any
conducted in a manner that permits AIMCO to be action to terminate AIMCO's status as a REIT, unless
qualified as a REIT, unless AIMCO ceases to qualify as the AIMCO Board of Directors recommends such action and
a REIT. The AIMCO Operating Partnership is authorized the holders of a majority of the shares entitled to
to perform any and all acts for the furtherance of the vote on such matter approve such action. The Internal
purposes and business of the AIMCO Operating Revenue Code defines a REIT as a corporation, trust or
Partnership, provided that the AIMCO Operating association (1) that is managed by one or more trustees
Partnership may not take, or refrain from taking, any or directors; (2) the beneficial ownership of which is
action which, in the judgment of the AIMCO GP could (i) evidenced by transferable shares, or by transferable
adversely affect the ability of AIMCO to continue to certificates of beneficial interest; (3) which would be
qualify as a REIT, (ii) subject AIMCO to certain income taxable as a domestic corporation, but for the special
and excise taxes, or (iii) violate any law or Internal Revenue Code provisions applicable to REITs;
regulation of any governmental body or agency (unless (4) that is neither a financial institution nor an
such action, or inaction, is specifically consented to insurance company subject to certain provisions of the
by AIMCO). Subject to the foregoing, Internal Revenue Code; (5) the beneficial
</TABLE>
58
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AIMCO OPERATING PARTNERSHIP AIMCO
<TABLE>
<S> <C>
the AIMCO Operating Partnership may invest in or enter ownership of which is held by 100 or more persons; (6)
into partnerships, joint ventures, or similar in which, during the last half of each taxable year,
arrangements not more than 50% in value of the outstanding stock is
owned, directly or indirectly, by five or fewer
individuals (as defined in the Internal Revenue Code to
include certain entities); and (7) which meets certain
other tests described in this Prospectus (including
with respect to the nature of its income and assets).
See "Federal Income Taxation of AIMCO and AIMCO
Stockholders -- General." The Internal Revenue Code
provides that conditions (1) through (4) must be met
during the entire taxable year, and that condition (5)
must be met during at least 335 days of a taxable year
of 12 months, or during a proportionate part of a
taxable year of less than 12 months. The Charter also
contains certain restrictions regarding transfers of
its shares, which provisions are intended to assist
AIMCO in satisfying the share ownership requirements
described in conditions (5) and (6) above. See "Federal
Income Taxation of AIMCO and AIMCO
Stockholders -- General."
Substantially all of the operations of AIMCO are
conducted through the AIMCO Operating Partnership and
its subsidiaries. Through its controlling interests in
the AIMCO Operating Partnership and other limited
partnerships and limited liability companies, AIMCO
owns and controls interests in numerous multi-family
rental apartment properties.
</TABLE>
Additional Equity
<TABLE>
<S> <C>
The AIMCO GP is authorized to issue additional Under the Charter, the AIMCO Board of Directors has the
partnership interests in the AIMCO Operating authority to classify and reclassify any of its
Partnership for any partnership purpose from time to unissued capital stock into shares of Preferred Stock
time to the limited partners and to other persons, and by setting or changing in any one or more respects the
to admit such other persons as additional limited preferences, conversion or other rights, voting powers,
partners, on terms and conditions and for such capital restrictions, limitations as to dividends,
contributions as may be established by the AIMCO GP in qualifications or terms or conditions of redemption of
its sole discretion. The net capital contribution need such shares of capital stock including, but not limited
not be equal for all partners. No action or consent by to, ownership restrictions consistent with the
the limited partners is required in connection with the Ownership Limit with respect to each series or class of
admission of any additional limited partner. See capital stock, and the number of shares constituting
"Description of OP Units -- Management by the AIMCO each series or class, and to increase or decrease the
GP." Subject to Delaware law, any additional partner- number of shares of any such series or class, to the
ship interests may be issued in one or more classes, or extent permitted by the MGCL. AIMCO is authorized to
one or more series of any of such classes, with such issue, in its discretion, additional equity securities
designations, preferences and relative, participating, including Class A Common Stock or Preferred Stock;
optional or other special rights, powers and duties as provided, however, that the total number of equity
shall be determined by the AIMCO GP, in its sole and securities outstanding may not exceed the total number
absolute discretion without the approval of any limited of authorized shares set forth in the Charter (i.e.,
partner, and set forth in a written document thereafter not more than 510,750,000 shares of capital stock).
attached to and made an exhibit to the AIMCO Operating Additionally, AIMCO may issue additional Class A Common
Partnership Agreement. Stock upon exchange of Common OP Units for Class A
Common Stock, and upon exercise of options granted
pursuant to AIMCO's stock incentive plan. Pursuant to
the AIMCO Operating Partnership Agreement, upon the
issuance of its capital stock, AIMCO is generally
obligated to contribute the cash proceeds or other
consideration received from such issuance to the AIMCO
Operating Partnership in exchange for, in the case of
Class A Common Stock, Common OP Units, or in the case
of an issuance of Preferred Stock, Preferred OP Units
with designations, preferences and other rights, terms
and provisions that are substantially the same as the
designations, preferences and other rights, terms and
provisions of such Preferred Stock. See "Description of
OP Units -- Issuance of Class A Common Stock by AIMCO."
Neither AIMCO's Charter nor its By-Laws impose any
restrictions upon dealings between AIMCO and its
directors, officers and affiliates. Under Maryland law,
however, material facts of the
</TABLE>
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AIMCO OPERATING PARTNERSHIP AIMCO
<TABLE>
<S> <C>
relationship, the transaction and the conflict of
interest must (i) be disclosed to the Board of
Directors and approved by the affirmative vote of a
majority of the disinterested directors; or (ii) be
disclosed to the stockholders and approved by the
affirmative vote of a majority of the disinterested
stockholders or (iii) be in fact fair and reasonable.
In addition, AIMCO has adopted certain policies
designed to minimize or eliminate conflicts of
interests between AIMCO and its executive officers and
directors. Without the approval of a majority of the
disinterested directors, AIMCO will not (i) acquire
from or sell to any director, officer or employee of
AIMCO or any entity in which a director, officer or
employee of AIMCO owns more than a 1% interest, or
acquire from or sell to any affiliate of any of the
foregoing, any assets or other property of AIMCO, (ii)
make any loan to or borrow from any of the foregoing
persons, or (iii) engage in any material transaction
with the foregoing. In addition, AIMCO has entered into
employment agreements with certain officers and
directors which include provisions intended to
eliminate or minimize potential conflicts of interest.
See "Business of the Company -- Policies of the Company
with Respect to Certain Other Activities."
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The AIMCO Operating Partnership Agreement contains no AIMCO is not restricted under its Charter or Bylaws
restrictions on borrowings, and the AIMCO GP has full from incurring borrowings.
power and authority to borrow money on behalf of the
AIMCO Operating Partnership.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Each limited partner has the right, upon written demand Under Maryland law, a stockholder holding at least 5%
with a statement of the purpose of such demand and at of the outstanding stock of a corporation may, upon
such limited partner's own expense, to obtain a current written request, inspect and copy during usual business
list of the name and last known business, residence or hours the list of the stockholders of such corporation.
mailing address of the AIMCO GP and each other partner.
</TABLE>
Management Control
<TABLE>
<S> <C>
All management powers over the business and affairs of The AIMCO Board of Directors has exclusive control over
the AIMCO Operating Partnership are vested in the AIMCO AIMCO's business and affairs subject only to the
GP. No limited partner has any right to participate in restrictions in the Charter and the Bylaws. The
or exercise control or management power over the policies adopted by the AIMCO Board of Directors may be
business and affairs of the AIMCO Operating altered or eliminated without a vote of AIMCO's
Partnership. The limited partners have the right to stockholders. Accordingly, except for their vote in the
vote on certain matters described under "Voting Rights" election of directors, holders of Class A Common Stock
below. The AIMCO GP may not be removed by the limited have no control over the ordinary business policies of
partners with or without cause. AIMCO.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Notwithstanding anything to the contrary set forth in The Charter limits the liability of AIMCO's directors
the AIMCO Operating Partnership Agreement, the AIMCO GP and officers to AIMCO and its stockholders to the
is not liable to the AIMCO Operating Partnership for fullest extent permitted from time to time by Maryland
losses sustained, liabilities incurred or benefits not law. Maryland law presently permits the liability of
derived as a result of errors in judgment or mistakes directors and officers to a corporation or its
of fact or law of any act or omission if the AIMCO GP stockholders for money damages to be limited, except
acted in good faith. The AIMCO Operating Partnership (i) to the extent that it is proved that the director
Agreement provides for indemnification of AIMCO, or any or officer actually received an improper benefit or
director or officer of AIMCO (in its capacity as the profit in money, property or services actually
previous general partner of the AIMCO Operating received, or (ii) if a judgment or other final
Partnership), the AIMCO GP, any officer or director of adjudication is entered in a proceeding based on a
AIMCO GP or the AIMCO Operating Partnership and such finding that the director's or officer's action, or
other persons as the AIMCO GP may designate from and failure to act, was the result of active and deliberate
against all losses, claims, damages, liabilities, joint dishonesty and was material to the cause of action
or several, expenses (including legal adjudicated in the proceeding. This provision does not
limit the ability of AIMCO or its stockholders to
obtain other relief, such
</TABLE>
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AIMCO OPERATING PARTNERSHIP AIMCO
<TABLE>
<S> <C>
fees), fines, settlements and other amounts incurred in as an injunction or recission.
connection with any actions relating to the operations
of the AIMCO Operating Partnership, as set forth in the The Charter and Bylaws require AIMCO to indemnify its
AIMCO Operating Partnership Agreement. The Delaware LP directors, officers and certain other parties to the
Act provides that subject to the standards and fullest extent permitted from time to time by Maryland
restrictions, if any, set forth in its partnership law. The MGCL permits a corporation to indemnify its
agreement, a limited partnership may, and shall have directors, officers and certain other parties against
the power to, indemnify and hold harmless any partner judgments, penalties, fines, settlements and reason-
or other person from and against any and all claims and able expenses actually incurred by them in connection
demands whatsoever. It is the position of the SEC that with any proceeding to which they may be made a party
indemnification of directors and officers for by reason of their service to or at the request of the
liabilities arising under the Securities Act is against corporation, unless it is established that (i) the act
public policy and is unenforceable pursuant to Section or omission of the indemnified party was material to
14 of the Securities Act of 1933. the matter giving rise to the proceeding and (x) was
committed in bad faith or (y) was the result of active
and deliberate dishonesty, (ii) the indemnified party
actually received an improper personal benefit in
money, property or services of (iii) in the case of any
criminal proceeding, the indemnified party had
reasonable cause to believe that the act or omission
was unlawful. Indemnification may be made against
judgments, penalties, fines, settlements and reasonable
expenses actually incurred by the director or officer
in connection with the proceeding; provided however,
that if the proceeding is one by or in the right of the
corporation, indemnification may not be made with
respect to any proceeding in which the director or
officer has been adjudged to be liable to the
corporation. In addition, a director or officer may not
be indemnified with respect to any proceeding charging
improper personal benefit to the director or officer
was adjudged to be liable on the basis that personal
benefit was improperly received. The termination of any
proceeding by conviction, or upon a plea of nolo
contendere or its equivalent, or an entry of any order
of probation prior to judgment, creates a rebuttable
presumption that the director or officer did not meet
the requisite standard or conduct required for
indemnification to be permitted. It is the position of
the SEC that indemnification of directors and officers
for liabilities arising under the Securities Act of
1933 is against public policy and is unenforceable
pursuant to Section 14 of the Securities Act of 1933.
AIMCO has entered into agreements with certain of its
officers, pursuant to which AIMCO has agreed to
indemnify such officers to the fullest extent permitted
by applicable law.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Except in limited circumstances, the AIMCO GP has The Charter and Bylaws of AIMCO contain a number of
exclusive management power over the business and provisions that may have the effect of delaying or
affairs of the AIMCO Operating Partnership. The AIMCO discouraging an unsolicited proposal for the
GP may not be removed as general partner of the AIMCO acquisition of AIMCO or the removal of incumbent
Operating Partnership by the limited partners with or management. These provisions include, among others: (1)
without cause. Under the AIMCO Operating Partnership authorized shares of stock that may be issued, in the
Agreement, the AIMCO GP, as a general partner, may, in discretion of the AIMCO Board of Directors, as
its sole discretion, prevent a transferee of an OP Unit Preferred Stock with superior voting rights to the
from becoming a substituted limited partner pursuant to Class A Common Stock; (2) a requirement that directors
the AIMCO Operating Partnership Agreement. The AIMCO GP may be removed only for cause and by a vote of holders
may exercise this right of approval to deter, delay or of at least two-thirds of the votes entitled to be cast
hamper attempts by persons to acquire a controlling in the election of directors; (3) advance notice
interest in the AIMCO Operating Partnership. required in order to nominate persons for election to
Additionally, the AIMCO Operating Partnership Agreement the AIMCO Board of Directors or to propose business to
contains restrictions on the ability of limited be considered by stockholders at a stockholder's
partners to transfer their OP Units. See "Description meeting; and (4) provisions designed to avoid
of OP Units -- Transfers and Withdrawals." concentration of stock ownership in a manner that would
jeopardize AIMCO's status as a REIT under the Internal
Revenue Code. See "Description of Common
Stock -- Restrictions on Transfer" and "Risk
Factors -- Ownership Limit."
The MGCL contains provisions concerning certain
"business combinations" and "control share
acquisitions" (each as defined
</TABLE>
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<PAGE> 67
AIMCO OPERATING PARTNERSHIP AIMCO
<TABLE>
<S> <C>
in the MGCL) that could have the effect of discouraging
offers to acquire AIMCO and of increasing the
difficulty of consummating any such offer. See
"Description of Common Stock -- Business Combinations"
and "Description of Common Stock -- Control Share
Acquisitions."
</TABLE>
Amendment of the Partnership Agreement or the Charter and Bylaws
<TABLE>
<S> <C>
With the exception of certain circumstances set forth AIMCO may amend, alter or repeal any provision
in the AIMCO Operating Partnership Agreement, whereby contained in its Charter upon (i) adoption by the AIMCO
the AIMCO GP may, without the consent of the limited Board of Directors of a resolution recommending such
partners, amend the AIMCO Operating Partnership amendment, alteration, or repeal, (ii) presentation by
Agreement, amendments to the AIMCO Operating the AIMCO Board of Directors to the stockholders of a
Partnership Agreement require the consent of the resolution at an annual or special meeting of the
limited partners holding a majority of the outstanding stockholders and (iii) approval of such resolution by
Common OP Units, excluding the Special Limited Partner the affirmative vote of the holders of a majority (or,
and certain other limited exclusions (a "Majority in in certain cases, two- thirds) of the aggregate number
Interest"). Amendments to the AIMCO Operating of votes entitled to be cast generally in the election
Partnership Agreement may be proposed by the AIMCO GP of directors.
or by holders of a Majority in Interest. Following such
proposal, the AIMCO GP will submit any proposed Under the MGCL, unless otherwise provided in a
amendment to the limited partners. The AIMCO GP will corporation's charter, a proposed charter amendment
seek the written consent of the limited partners on the requires an affirmative vote of two-thirds of the
proposed amendment or will call a meeting to vote outstanding stock entitled to be cast on the matter.
thereon. See "Description of OP Units -- Amendment of However, the Charter provides that it may be amended
the AIMCO Operating Partnership Agreement." upon the affirmative vote of a majority (or, as
applicable, two-thirds) of the stock entitled to be
cast generally in the election of directors ("voting
stock"). Under the MGCL, the power to adopt, alter, and
repeal the bylaws is vested in the stockholders, except
to the extent that the charter or bylaws vest it in the
board of directors. The Bylaws provide that they may be
amended by vote of a majority of the AIMCO Board of
Directors. An amendment to any provision of the Bylaws
relating to their repeal or the removal of directors
may be effected only by the vote of two-thirds of the
voting stock.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The AIMCO GP does not receive compensation for its The employees, officers and directors of AIMCO receive
services as general partner of the AIMCO Operating compensation for their services.
Partnership. However, the AIMCO GP is entitled to
payments, allocations and distributions in its capacity
as general partner of the AIMCO Operating Partnership.
In addition, the AIMCO Operating Partnership is
responsible for all expenses incurred relating to the
AIMCO Operating Partnership's ownership of its assets
and the operation of the AIMCO Operating Partnership
and reimburses the AIMCO GP for such expenses paid by
the AIMCO GP. The employees of the AIMCO Operating
Partnership receive compensation for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Except for fraud, willful misconduct or gross The MGCL provides that no stockholder of a corporation
negligence, no limited partner has personal liability will be personally liable for any obligations of such
for the AIMCO Operating Partnership's debts and corporation. Generally the liability of stockholders
obligations, and liability of the limited partners for for AIMCO's debts and obligations is limited to the
the AIMCO Operating Partnership's debts and obli- amount of their investment in AIMCO.
gations is generally limited to the amount of their
investment in the AIMCO Operating Partnership. However,
the limitations on the liability of limited partners
for the obligations of a limited partnership have not
been clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without
compliance with the applicable limited partnership
statute, or that the right or the exercise of the right
by the limited partners holding OP Units as a group to
make certain amendments to the AIMCO Operating
</TABLE>
62
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AIMCO OPERATING PARTNERSHIP AIMCO
<TABLE>
<S> <C>
Partnership Agreement or to take other action pursuant
to the AIMCO Operating Partnership Agreement
constituted participation in the "control" of the AIMCO
Operating Partnership's business, then a limited
partner could be held liable under certain
circumstances for the AIMCO Operating Partnership's
obligations to the same extent as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Unless otherwise provided for in the relevant Under Maryland law, the members of the AIMCO Board of
partnership agreement, Delaware law generally requires Directors must perform their duties in good faith, in a
a general partner of a Delaware limited partnership to manner that they reasonably believe to be in the best
adhere to fiduciary duty standards under which it owes interests of AIMCO and with the care of an ordinarily
its limited partners the highest duties of good faith, prudent person in a like position. Members of the AIMCO
fairness and loyalty and which generally prohibit such Board of Directors who act in such a manner will
general partner from taking any action or engaging in generally not be liable to AIMCO for monetary damages
any transaction as to which it has a conflict of arising from their activities as members of the AIMCO
interest. The AIMCO Operating Partnership Agreement Board of Directors.
expressly authorizes the AIMCO GP to enter into, on
behalf of the AIMCO Operating Partnership, a right of
first opportunity arrangement and other conflict
avoidance agreements with various affiliates of the
AIMCO Operating Partnership and the AIMCO GP, on such
terms as the AIMCO GP, in its sole and absolute
discretion, believes are advisable. The AIMCO Operating
Partnership Agreement expressly limits the liability of
the AIMCO GP by providing that the AIMCO GP, and its
officers and directors will not be liable or
accountable in damages to the AIMCO Operating
Partnership, the limited partners or assignees for
errors in judgment or mistakes of fact or law or of any
act or omission if the AIMCO GP or such director or
officer acted in good faith. See "Risk Factors -- Risks
Associated With an Investment in OP Units -- Conflicts
of Interest and Fiduciary Responsibility" and
"Description of OP Units -- Fiduciary
Responsibilities."
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
The AIMCO Operating Partnership is not subject to AIMCO has elected to be taxed as a REIT beginning with
federal income taxes. Instead, each OP Unitholder its fiscal year ended December 31, 1994. So long as it
includes in income its allocable share of the AIMCO qualifies as a REIT, AIMCO will be permitted to deduct
Operating Partnership's taxable income or loss when it distributions paid to its stockholders, which
determines its individual federal income tax liability. effectively will reduce the "double taxation" that
typically results when a corporation earns income and
distributes that income to its stockholders in the form
of dividends. A qualified REIT, however, is subject to
federal income tax on income that is not distributed
and also may be subject to federal income and excise
taxes in certain circumstances. The maximum federal
income tax rate for corporations under current law is
35%, but in certain circumstances a REIT is subject to
a 100% tax on certain kinds of income.
Income and loss from the AIMCO Operating Partnership Dividends paid by AIMCO will be treated as "portfolio"
may be subject to the passive activity limitations. If income and cannot be offset with losses from "passive
an investment in an OP Unit is treated as a passive activities."
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the management companies or interest
paid by the management companies does not qualify as
passive activity income and cannot be offset against
losses from "passive activities."
</TABLE>
63
<PAGE> 69
AIMCO OPERATING PARTNERSHIP AIMCO
<TABLE>
<S> <C>
Cash distributions by the AIMCO Operating Partnership Distributions by AIMCO to its taxable domestic
are not taxable to an OP Unitholder except to the stockholders out of current or accumulated earnings and
extent they exceed such Partner's basis in its interest profits will be taxed as ordinary income. Distributions
in the AIMCO Operating Partnership (which will include that are designated as capital gain dividends generally
such OP Unitholder's allocable share of the AIMCO will be taxed as long-term capital gain, subject to
Operating Partnership's nonrecourse debt). certain limitations. A distribution in excess of
current or accumulated earnings and profits will be
treated as a non-taxable return of basis to the extent
of a stockholder's adjusted basis in its shares of
stock of AIMCO with respect to which such distribution
is received, with the excess, if any, taxed as capital
gain.
Each year, OP Unitholders receive a Schedule K-1 tax Each year, stockholders of AIMCO receive a Form 1099
form containing tax information for inclusion in used by REITs to report dividends paid to their
preparing their federal income tax returns. stockholders.
OP Unitholders are required, in some cases, to file Stockholders who are individuals generally will not be
state income tax returns and/or pay state income taxes required to file state income tax returns and/or pay
in the states in which the AIMCO Operating Partnership state income taxes outside of their states of residence
owns property or transacts business, even if they are solely as a result of the fact that AIMCO owns property
not residents of those states. The AIMCO Operating or transacts business in various jurisdictions. AIMCO
Partnership may be required to pay state income taxes may be required to pay state income taxes in various
in certain states. states.
</TABLE>
64
<PAGE> 70
COMPARISON OF COMMON OP UNITS AND CLASS A COMMON STOCK
COMMON OP UNITS CLASS A COMMON STOCK
Nature of Investment
<TABLE>
<S> <C>
The Common OP Units constitute equity interests The Class A Common Stock constitute equity interests in
entitling each OP Unitholder to his or her pro rata AIMCO. Dividends are paid, when and as declared by the
share of cash distributions made from Available Cash AIMCO Board of Directors. In order to qualify as a
(as such term is defined in the AIMCO Operating REIT, AIMCO is required to distribute dividends (other
Partnership Agreement) to the partners of the AIMCO than capital gain dividends) to its stockholders in an
Operating Partnership. amount at least equal to (A) the sum of (i) 95% of
AIMCO's "REIT taxable income" (computed without regard
to the dividends paid deduction and AIMCO's net capital
gain) and (ii) 95% of the net income (after tax), if
any, from foreclosure property, minus (B) the sum of
certain items of noncash income.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Under the AIMCO Operating Partnership Agreement, the Each outstanding share of Class A Common Stock entitles
limited partners have voting rights only with respect the holder thereof to one vote on all matters submitted
to certain limited matters such as certain amendments to stockholders for vote, including the election of
and termination of the AIMCO Operating Partnership directors. See "Description of Common Stock -- Class A
Agreement and certain transactions such as the Common Stock." Holders of Class A Common Stock have the
institution of bankruptcy proceedings, an assignment right to vote on, among other things, a merger of
for the benefit of creditors and certain transfers by AIMCO, amendments to the Charter and the dissolution of
the AIMCO GP of its interest in the AIMCO Operating AIMCO. Certain amendments to the Charter require the
Partnership or the admission of a successor general affirmative vote of not less than two-thirds of votes
partner. entitled to be cast on the matter. The Charter permits
the AIMCO Board of Directors to classify and issue
capital stock in one or more series having voting power
which may differ from that of the Class A Common Stock.
Under Maryland law, a consolidation, merger, share
exchange or transfer of all or substantially all of the
assets of AIMCO requires the affirmative vote of not
less than two-thirds of all of the votes entitled to be
cast on the matter. With respect to each of these
transactions, only the holders of Class A Common Stock
are entitled to vote on the matters. No approval of the
stockholders is required for the sale of less than all
or substantially all of AIMCO's assets.
Maryland law provides that the AIMCO Board of Directors
must obtain the affirmative vote of at least two-thirds
of the votes entitled to be cast on the matter in order
to dissolve AIMCO. Only the holders of Class A Common
Stock are entitled to vote on AIMCO's dissolution.
</TABLE>
Distributions
<TABLE>
<S> <C>
Subject to the rights of holders of any outstanding Holders of the Class A Common Stock are entitled to
Preferred OP Units, the AIMCO Operating Partnership received dividends, when and as declared by the AIMCO
Agreement requires the AIMCO GP to cause the AIMCO Board of Directors, out of funds legally available
Operating Partnership to distribute quarterly all, or therefor. See "Per Share and Per Unit Data."
such portion as the AIMCO GP may in its sole and
absolute discretion determine, of Available Cash Holders of Class B Common Stock do not have dividend
generated by the AIMCO Operating Partnership during rights. A certain number of shares of Class B Common
such quarter to the AIMCO GP, the Special Limited Stock are eligible for conversion into an equal number
Partner and the holders of Common OP Units on the of shares of Class A Common Stock. Once Class B Common
record date established by the AIMCO GP with respect to Stock has been converted into Class A Common Stock,
such quarter, in accordance with their respective holders of such shares of converted Class A Common
interests in the AIMCO Operating Partnership on such Stock will have dividend rights of Class A Common Stock
record date. Holders of any other Preferred OP Units generally. See "Description of Common Stock -- Class B
issued in the future may have priority over the AIMCO Common Stock."
GP, the Special Limited Partner and holders of Common
OP Units with respect to distributions of Available AIMCO, in order to qualify as a REIT, is required to
Cash, distributions upon liquidation or other distribute dividends (other than capital gain
distributions. See "Per Share and Per Unit Data." dividends) to its stockholders in an amount at least
equal to (A) the sum of (i) 95% of AIMCO's
</TABLE>
65
<PAGE> 71
COMMON OP UNITS CLASS A COMMON STOCK
<TABLE>
<S> <C>
The AIMCO GP in its sole and absolute discretion may "REIT taxable income" (computed without regard to the
distribute to the OP Unitholders Available Cash on a dividends paid deduction and AIMCO's net capital gain)
more frequent basis and provide for an appropriate and (ii) 95% of the net income (after tax), if any,
record date. The AIMCO Operating Partnership Agreement from foreclosure property, minus (B) the sum of certain
requires the AIMCO GP to take such reasonable efforts, items of noncash income. See "Federal Income Taxation
as determined by it in its sole and absolute discretion of AIMCO and AIMCO Stockholders -- General."
and consistent with AIMCO's qualification as a REIT, to
cause the AIMCO Operating Partnership to distribute
sufficient amounts to enable the AIMCO GP to transfer
funds to AIMCO and enable AIMCO to pay stockholder
dividends that will (i) satisfy the requirements for
qualifying as a REIT under the Code, and the Treasury
Regulations and (ii) avoid any federal income or excise
tax liability of AIMCO. See "Description of OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the OP Units and the OP The Class A Common Stock is transferable subject to the
Units are not listed on any securities exchange. Ownership Limit set forth in the Charter. The Class A
Common Stock is listed on the NYSE.
Pursuant to the AIMCO Operating Partnership Agreement,
until the expiration of one year from the date on which
an OP Unitholder acquired OP Units, subject to certain
exceptions, such OP Unitholder may not transfer all or
any portion of its OP Units to any transferee without
the consent of the AIMCO GP, which consent may be
withheld in its sole and absolute discretion. After the
expiration of one year, such OP Unitholder has the
right to transfer all or any portion of its OP Units to
any person, subject to the satisfaction of certain
conditions specified in the AIMCO Operating Partnership
Agreement, including the AIMCO GP's right of first
refusal. See "Description of OP Units -- Transfers and
Withdrawals."
After the first anniversary of becoming a holder of
Common OP Units, an OP Unitholder has the right,
subject to the terms and conditions of the AIMCO
Operating Partnership Agreement, to require the AIMCO
Operating Partnership to redeem all or a portion of the
Common OP Units held by such party in exchange for
shares of Class A Common Stock or a cash amount equal
to the value of such shares, as the AIMCO Operating
Partnership may elect. See "Description of OP
Units -- Redemption Rights." Upon receipt of a notice
of redemption, the AIMCO Operating Partnership may, in
its sole and absolute discretion but subject to the
restrictions on the ownership of Class A Common Stock
imposed under the AIMCO Charter and the transfer
restrictions and other limitations thereof, elect to
cause AIMCO to acquire some or all of the tendered
Common OP Units in exchange for Class A Common Stock,
based on an exchange ratio of one share of Class A
Common Stock for each Common OP Unit, subject to
adjustment as provided in the AIMCO Operating
Partnership Agreement.
</TABLE>
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FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS
The following is a summary of certain federal income tax consequences
resulting from the acquisition of, holding, exchanging, and otherwise disposing
of Class A Common Stock and the Preferred Stock (collectively, the Class A
Common Stock and the Preferred Stock are referred to herein as the "AIMCO
Stock"). This discussion is based upon the Code, the Treasury Regulations,
rulings issued by the IRS, and judicial decisions, all in effect as of the date
of this Registration Statement and all of which are subject to change, possibly
retroactively. Such summary is also based on the assumptions that the operation
of AIMCO, the AIMCO Operating Partnership and the limited liability companies
and limited partnerships in which they own controlling interests (collectively,
the "Subsidiary Partnerships") will be in accordance with their respective
organizational documents and partnership agreements. This summary is for general
information only and does not purport to discuss all aspects of federal income
taxation which may be important to a particular investor in light of its
investment or tax circumstances, or to certain types of investors subject to
special tax rules (including financial institutions, broker-dealers, insurance
companies, and, except to the extent discussed below, tax-exempt organizations
and foreign investors, as determined for United States federal income tax
purposes). This summary assumes that investors will hold their AIMCO Stock as
"capital assets" (generally, property held for investment). No advance ruling
has been or will be sought from the IRS regarding any matter discussed in this
Registration Statement.
THE FEDERAL INCOME TAX TREATMENT OF HOLDERS OF AIMCO STOCK DEPENDS IN SOME
INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF
FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE
AVAILABLE. ACCORDINGLY, EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING,
HOLDING, EXCHANGING, OR OTHERWISE DISPOSING OF AIMCO STOCK AND OF AIMCO'S
ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES, AS A REAL ESTATE
INVESTMENT TRUST.
GENERAL
The REIT provisions of the Code are highly technical and complex. The
following summary sets forth certain aspects of the provisions of the Code that
govern the federal income tax treatment of a REIT and its stockholders. This
summary is qualified in its entirety by the applicable Code provisions, Treasury
Regulations, and administrative and judicial interpretations thereof, all of
which are subject to change, possibly retroactively.
AIMCO has elected to be taxed as a REIT under the Code commencing with its
taxable year ending December 31, 1994, and AIMCO intends to continue such
election. Although AIMCO believes, and it has received an opinion of Counsel to
the effect that, commencing with the AIMCO's initial taxable year ended December
31, 1994, AIMCO was organized in conformity with the requirements for
qualification as a REIT, and its proposed method of operation, and its actual
method of operation since its formation, will enable it to meet the requirements
for qualification and taxation as a REIT under the Code. No assurance can be
given that AIMCO has been or will remain so qualified. It must be emphasized
that this opinion is based and conditioned upon certain assumptions and
representations and covenants made by AIMCO as to factual matters (including
representations of AIMCO concerning its business and properties as set forth in
this Registration Statement). The opinion is expressed as of its date and
Counsel has no obligation to advise holders of Securities of any subsequent
change in the matters stated, represented or assumed or any subsequent change in
the applicable law. Moreover, such qualification and taxation as a REIT depends
upon AIMCO's ability to meet, through actual annual operating results,
distribution levels and diversity of stock ownership, the various qualification
tests imposed under the Code as discussed below, the results of which will not
be reviewed by Counsel. Accordingly, no assurance can be given that the actual
results of AIMCO's operation for any one taxable year will satisfy such
requirements. See " -- Failure to Qualify." An opinion of counsel is not binding
on the IRS, and no assurance can be given that the IRS will not challenge
AIMCO's eligibility for taxation as a REIT.
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Provided AIMCO qualifies for taxation as a REIT, it will generally not be
subject to federal corporate income tax on its net income that is currently
distributed to its stockholders. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, notwithstanding AIMCO's
qualification as a REIT, AIMCO will be subject to federal income tax as follows:
First, AIMCO will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains. Second, under certain
circumstances, AIMCO may be subject to the "alternative minimum tax" on its
items of tax preference. Third, if AIMCO has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fourth, if AIMCO should fail to satisfy the 75% gross income test or the 95%
gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which AIMCO fails the 75% or 95%
test multiplied by (b) a fraction intended to reflect AIMCO's profitability.
Fifth, if AIMCO should fail to distribute during each calendar year at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year (other than certain long-term capital
gains that AIMCO elects to retain and pay the tax thereon), and (iii) any
undistributed taxable income from prior periods, AIMCO would be subjected to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. Sixth, if AIMCO acquires assets from a subchapter C
corporation in a transaction in which the adjusted tax basis of the assets in
the hands of AIMCO is determined by reference to the adjusted tax basis of such
assets in the hands of the subchapter C corporation (such as the assets acquired
from Insignia in the Insignia Merger), under Treasury Regulations not yet
promulgated, the subchapter C corporation would be required to recognize any net
Built-In Gain (as defined below) that would have been realized if the Subchapter
C corporation had liquidated on the day before the date of the transfer.
Pursuant to IRS Notice 88-19, AIMCO may elect, in lieu of the treatment
described above, to be subject to tax at the highest regular corporate tax rate
on such gain to the extent of the excess, if any, of the fair market value over
the adjusted basis of such asset as of the beginning of the ten-year period
("Built-in Gain"). AIMCO intends to make such an election and, therefore, will
be taxed at the highest regular corporate rate on such Built-in Gain if, and to
the extent, such assets are sold within the specified ten-year period. It should
be noted that AIMCO has acquired (and will acquire in the Insignia Merger) a
significant amount of assets with Built-in Gain and a taxable disposition by
AIMCO of any of these assets within ten years of their acquisitions would
subject AIMCO to tax under the foregoing rule. Seventh, AIMCO could be subject
to foreign taxes on its investments and activities in foreign jurisdictions. In
addition, AIMCO could also be subject to tax in certain situations and on
certain transactions not presently contemplated.
Requirements for Qualification
The Code defines a REIT as a corporation, trust or association (1) that is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (3) which would be taxable as a domestic corporation, but
for the special Code provisions applicable to REITs; (4) that is neither a
financial institution nor an insurance company subject to certain provisions of
the Code; (5) the beneficial ownership of which is held by 100 or more persons;
(6) in which, during the last half of each taxable year, not more than 50% in
value of the outstanding stock is owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities); and (7)
which meets certain other tests described below (including with respect to the
nature of its income and assets). The Code provides that conditions (1) through
(4) must be met during the entire taxable year, and that condition (5) must be
met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. The Charter
provides certain restrictions regarding transfers of its shares, which
provisions are intended to assist AIMCO in satisfying the share ownership
requirements described in conditions (5) and (6) above.
To monitor AIMCO's compliance with the share ownership requirements, AIMCO
is required to maintain records regarding the actual ownership of its shares. To
do so, AIMCO must demand written statements each year from the record holders of
certain percentages of its stock in which the record holders are
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to disclose the actual owners of the shares (i.e., the persons required to
include in gross income the REIT dividends). A list of those persons failing or
refusing to comply with this demand must be maintained as part of AIMCO's
records. A stockholder who fails or refuses to comply with the demand must
submit a statement with its tax return disclosing the actual ownership of the
shares and certain other information.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. AIMCO satisfies this requirement.
Ownership of Partnership Interests
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT is deemed to own its proportionate share of
the partnership's assets and to earn its proportionate share of the
partnership's income. In addition, the assets and gross income of the
partnership retain the same character in the hands of the REIT for purposes of
the gross income and asset tests applicable to REITs as described below. Thus,
AIMCO's proportionate share of the assets, liabilities and items of income of
the partnerships and limited liability companies in which it has ownership
interests (the "Subsidiary Partnerships") will be treated as assets, liabilities
and items of income of AIMCO for purposes of applying the REIT requirements
described herein. A summary of certain rules governing the federal income
taxation of partnerships and their partners is provided below in "Tax Aspects of
AIMCO's Investments in Partnerships."
Income Tests
In order to maintain qualification as a REIT, AIMCO annually must satisfy
two gross income requirements. First, at least 75% of AIMCO's gross income
(excluding gross income from "prohibited transactions," i.e., certain sales of
property held primarily for sale to customers in the ordinary course of
business) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments. Second, at least 95% of AIMCO's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived from such real property investments, and from dividends,
interest and gain from the sale or disposition of stock or securities (or from
any combination of the foregoing).
Rents received by AIMCO through the Subsidiary Partnerships will qualify as
"rents from real property" in satisfying the gross income requirements described
above, only if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Moreover, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" from which the REIT derives no revenue.
However, AIMCO (or its affiliates) is permitted to directly perform services
that are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered rendered to the
occupant of the property. In addition, AIMCO (or its affiliates) may provide
non-customary services to tenants of its properties without disqualifying all of
the rent from the property if the payment for such services does not exceed 1%
of the total gross income from the property. For purposes of this test, the
income received from such non-customary services is deemed to be at least 150%
of the direct cost of providing the services.
PAMS LP and the other subsidiaries of the Company that manage the Managed
Properties (collectively, the "Management Subsidiaries") receive management fees
and other income. A portion of such fees and other income accrue to AIMCO
through distributions from the Management Subsidiaries that will be classified
as dividend income to the extent of the earnings and profits of the Management
Subsidiaries. Such distributions will generally qualify under the 95% gross
income test but not under the 75% gross income test.
If AIMCO fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it may nevertheless qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if AIMCO's failure to meet such tests was
due to reasonable
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cause and not due to willful neglect, AIMCO attaches a schedule of the sources
of its income to its return, and any incorrect information on the schedule was
not due to fraud with intent to evade tax. It is not possible, however, to state
whether in all circumstances AIMCO would be entitled to the benefit of these
relief provisions. If these relief provisions are inapplicable to a particular
set of circumstances involving AIMCO, AIMCO will not qualify as a REIT. As
discussed above in "-- General," even where these relief provisions apply, a tax
is imposed with respect to the excess net income.
Asset Tests
AIMCO, at the close of each quarter of its taxable year, must also satisfy
three tests relating to the nature of its assets. First, at least 75% of the
value of AIMCO's total assets must be represented by real estate assets
(including its allocable share of real estate assets held by the Subsidiary
Partnerships), certain stock or debt instruments purchased by AIMCO with new
capital, cash, cash items and U.S. government securities. Second, not more than
25% of AIMCO's total assets may be represented by securities other than those in
the 75% asset class. Third, of the investments included in the 25% asset class,
the value of any one issuer's securities owned by AIMCO may not exceed 5% of the
value of AIMCO's total assets, and AIMCO may not own more than 10% of any one
issuer's outstanding voting securities.
AIMCO indirectly owns interests in the Management Subsidiaries. As set
forth above, the ownership of more than 10% of the voting securities of any one
issuer by a REIT or the investment of more than 5% of the REIT's total assets in
any one issuer's securities is prohibited by the asset tests. AIMCO believes
that its indirect ownership interests in the Management Subsidiaries qualify
under the asset tests set forth above. However, no independent appraisals have
been obtained to support AIMCO's conclusions as to the value of the AIMCO
Operating Partnership's total assets and the value of the AIMCO Operating
Partnership's interest in the Management Subsidiaries and these values are
subject to change in the future. Accordingly, there can be no assurance that the
IRS will not contend that the AIMCO Operating Partnership's ownership interests
in the Management Subsidiaries disqualifies AIMCO from treatment as a REIT.
AIMCO's indirect interests in the AIMCO Operating Partnership and other
Subsidiary Partnerships are held through wholly owned corporate subsidiaries of
AIMCO organized and operated as "qualified REIT subsidiaries" within the meaning
of the Code. Qualified REIT subsidiaries are not treated as separate entities
from their parent REIT for federal income tax purposes. Instead, all assets,
liabilities and items of income, deduction and credit of each qualified REIT
subsidiary are treated as assets, liabilities and items of AIMCO. Each qualified
REIT subsidiary therefore is not subject to federal corporate income taxation,
although it may be subject to state or local taxation. In addition, AIMCO's
ownership of the voting stock of each qualified REIT subsidiary does not violate
the general restriction against ownership of more than 10% of the voting
securities of any issuer.
Annual Distribution Requirements
AIMCO, in order to qualify as a REIT, is required to distribute dividends
(other than capital gain dividends) to its stockholders in an amount at least
equal to (A) the sum of (i) 95% of AIMCO's "REIT taxable income" (computed
without regard to the dividends paid deduction and AIMCO's net capital gain) and
(ii) 95% of the net income (after tax), if any, from foreclosure property, minus
(B) the sum of certain items of noncash income. Such distributions must be paid
in the taxable year to which they relate, or in the following taxable year if
declared before AIMCO timely files its tax return for such year and if paid with
or before the first regular dividend payment after such declaration. To the
extent that AIMCO distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at ordinary
corporate tax rates. AIMCO may elect to retain, rather than distribute, its net
long-term capital gains and pay tax on such gains. In such a case, AIMCO's
stockholders would include their proportionate share of such undistributed
long-term capital gains in income and receive a credit for their share of the
tax paid by AIMCO. AIMCO's stockholders would then increase the adjusted basis
of their AIMCO shares by the difference between the designated amounts included
in their long-term capital gains and the tax deemed paid with respect to their
shares. If AIMCO should fail to distribute during each calendar year at least
the sum of (i) 85% of its REIT ordinary income for such year and (ii) 95% of its
REIT capital gain net income for such
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year (excluding retained long-term capital gains), and (iii) any undistributed
taxable income from prior periods, AIMCO would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually distributed.
AIMCO believes that it has made, and intends to make, timely distributions
sufficient to satisfy these annual distribution requirements.
It is possible that AIMCO, from time to time, may not have sufficient cash
to meet the 95% distribution requirement due to timing differences between (i)
the actual receipt of cash (including receipt of distributions from the AIMCO
Operating Partnership) and (ii) the inclusion of certain items in income by
AIMCO for federal income tax purposes. In the event that such timing differences
occur, in order to meet the 95% distribution requirement, AIMCO may find it
necessary to arrange for short-term, or possibly long-term, borrowings or to pay
dividends in the form of taxable distributions of property.
Under certain circumstances, AIMCO may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in AIMCO's deduction for
dividends paid for the earlier year. Thus, AIMCO may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, AIMCO will be
required to pay interest and a penalty based on the amount of any deduction
taken for deficiency dividends.
Distribution of Acquired Earnings and Profits
The Code provides that when a REIT acquires a corporation that is currently
a C corporation (i.e., a corporation without a REIT election, such as Insignia),
the REIT may qualify as a REIT only if, as of the close of the year of
acquisition, the REIT has no "earnings and profits" acquired from such C
corporation. In the Insignia Merger, AIMCO will succeed to the earnings and
profits of Insignia and, therefore, AIMCO must distribute such earnings and
profits effective on or before December 31, 1998. Insignia has retained
independent certified public accountants to determine Insignia's earnings and
profits for purposes of this requirement. The determination of the independent
certified public accountants will be based upon Insignia's tax returns as filed
with the IRS and other assumptions and qualifications set forth in the reports
issued by such accountants. Any adjustments to Insignia's income for taxable
years ending on or before the closing of the Insignia Merger, including as a
result of an examination of its returns by the IRS or the receipt of certain
indemnity or other payments, could affect the calculation of Insignia's earnings
and profits. Furthermore, the determination of earnings and profits requires the
resolution of certain technical tax issues with respect to which there is no
authority directly on point and, consequently, the proper treatment of these
issues for earnings and profits purposes is not free from doubt. There can be no
assurance that the IRS will not examine the tax returns of Insignia and propose
adjustments to increase its taxable income and therefore its earnings and
profits. In this regard, the IRS can consider all taxable years of Insignia as
open for review for purposes of determining the amount of such earnings and
profits. Moreover, if the Special Dividend is not treated as a dividend under
the Code, AIMCO may, depending upon the amount of other distributions made by
AIMCO subsequent to the Insignia Merger, fail to distribute an amount equal to
Insignia's earnings and profits. AIMCO's failure to distribute an amount equal
to such earnings and profits effective on or before December 31, 1998, would
result in AIMCO's failure to qualify as a REIT.
Failure to Qualify
If AIMCO fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, AIMCO will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to stockholders in any year in which AIMCO fails to qualify
will not be deductible by AIMCO nor will they be required to be made. In such
event, to the extent of current and accumulated earnings and profits, all
distributions to stockholders will be taxable as ordinary income, and, subject
to certain limitations of the Code, corporate distributees may be eligible for
the dividends received deduction. Unless AIMCO is entitled to relief under
specific statutory provisions, AIMCO would also be disqualified from taxation as
a REIT for the four taxable years following the year during which qualification
was lost. It is not possible to state whether in all circumstances AIMCO would
be entitled to such statutory relief.
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TAX ASPECTS OF AIMCO'S INVESTMENTS IN PARTNERSHIPS
General
Substantially all of AIMCO's investments are held indirectly through the
AIMCO Operating Partnership. In general, partnerships are "pass-through"
entities that are not subject to federal income tax. Rather, partners are
allocated their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. AIMCO will include in its income its proportionate share of the
foregoing partnership items for purposes of the various REIT income tests and in
the computation of its REIT taxable income. Moreover, for purposes of the REIT
asset tests, AIMCO will include its proportionate share of assets held by the
Subsidiary Partnerships. See "-- Federal Income Taxation of AIMCO and AIMCO
Stockholders -- General."
Entity Classification
AIMCO's direct and indirect investment in partnerships involves special tax
considerations, including the possibility of a challenge by the IRS of the
status of any of the Subsidiary Partnerships as a partnership (as opposed to an
association taxable as a corporation) for federal income tax purposes. If any of
these entities were treated as an association for federal income tax purposes,
it would be subject to an entity-level tax on its income. In such a situation,
the character of AIMCO's assets and items of gross income would change and could
preclude AIMCO from satisfying the asset tests and the income tests (see "--
Federal Income Taxation of AIMCO and AIMCO Stockholders -- Asset Tests" and "--
Federal Income Taxation of AIMCO and AIMCO Stockholders -- Income Tests"), and
in turn could prevent AIMCO from qualifying as a REIT. See "-- Federal Income
Taxation of AIMCO and AIMCO Stockholders -- Failure to Qualify" above for a
discussion of the effect of AIMCO's failure to meet such tests for a taxable
year. In addition, any change in the status of any of the Subsidiary
Partnerships for tax purposes might be treated as a taxable event, in which case
AIMCO might incur a tax liability without any related cash distributions.
Tax Allocations with Respect to the Properties
Under the Code and the Treasury Regulations, income, gain, loss and
deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership must
be allocated in a manner such that the contributing partner is charged with, or
benefits from, respectively, the unrealized gain or unrealized loss associated
with the property at the time of the contribution. The amount of such unrealized
gain or unrealized loss is generally equal to the difference between the fair
market value of the contributed property at the time of contribution, and the
adjusted tax basis of such property at the time of contribution (a "Book -- Tax
Difference"). Such allocations are solely for federal income tax purposes and do
not affect the book capital accounts or other economic or legal arrangements
among the partners. See "-- Federal Income Taxation of the AIMCO Operating
Partnership and OP Unitholders -- Tax Consequences Upon Contribution of Property
to the AIMCO Operating Partnership." The AIMCO Operating Partnership was formed
by way of contributions of appreciated property (including certain of the Owned
Properties). Consequently, allocations must be made in a manner consistent with
these requirements. Where a partner contributes cash to a partnership that holds
appreciated property, the Treasury Regulations provide for a similar allocation
of such items to the other partners. These rules apply to the contribution by
AIMCO to the AIMCO Operating Partnership of the cash proceeds received in any
offerings of its stock.
In general, certain OP Unitholders will be allocated lower amounts of
depreciation deductions for tax purposes and increased taxable income and gain
on the sale by the AIMCO Operating Partnership or other Subsidiary Partnerships
of the contributed properties. This will tend to eliminate the Book-Tax
Difference over the life of these partnerships. However, the special allocations
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale. Thus, the
carryover basis of the contributed properties in the hands of the AIMCO
Operating Partnership or other Subsidiary Partnerships may cause AIMCO to be
allocated lower depreciation and other deductions, and
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possibly greater amounts of taxable income in the event of a sale of such
contributed assets in excess of the economic or book income allocated to it as a
result of such sale. This may cause AIMCO to recognize taxable income in excess
of cash proceeds, which might adversely affect AIMCO's ability to comply with
the REIT distribution requirements. See "-- Federal Income Taxation of AIMCO and
AIMCO Stockholders -- Annual Distribution Requirements."
With respect to any property purchased or to be purchased by any of the
Subsidiary Partnerships (other than through the issuance of OP Units) subsequent
to the formation of AIMCO, such property will initially have a tax basis equal
to its fair market value and the special allocation provisions described above
will not apply.
Sale of the Properties
AIMCO's share of any gain realized by the AIMCO Operating Partnership or
any other Subsidiary Partnership on the sale of any property held as inventory
or primarily for sale to customers in the ordinary course of business will be
treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "-- Taxation of AIMCO and AIMCO
Stockholders -- General -- Income Tests." Under existing law, whether property
is held as inventory or primarily for sale to customers in the ordinary course
of a partnership's trade or business is a question of fact that depends on all
the facts and circumstances with respect to the particular transaction. The
AIMCO Operating Partnership and the other Subsidiary Partnerships intend to hold
the Owned Properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning and operating the Owned
Properties and to make such occasional sales of the Owned Properties, including
peripheral land, as are consistent with AIMCO's investment objectives.
TAXATION OF MANAGEMENT SUBSIDIARIES
A portion of the amounts to be used to fund distributions to stockholders
is expected to come from distributions made by the Management Subsidiaries to
the AIMCO Operating Partnership, and interest paid by the Management
Subsidiaries on certain notes held by the AIMCO Operating Partnership. In
general, the Management Subsidiaries pay federal, state and local income taxes
on their taxable income at normal corporate rates. Any federal, state or local
income taxes that the Management Subsidiaries are required to pay will reduce
AIMCO's cash flow from operating activities and its ability to make payments to
holders of its securities.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
Distributions
Provided AIMCO qualifies as a REIT, distributions made to AIMCO's taxable
domestic stockholders out of current or accumulated earnings and profits (and
not designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for corporations. Distributions (and retained long-term capital gains) that are
designated as capital gain dividends will be taxed as long-term capital gains
(to the extent that they do not exceed AIMCO's actual net capital gain for the
taxable year) without regard to the period for which the stockholder has held
its stock. However, corporate stockholders may be required to treat up to 20% of
certain capital gain dividends as ordinary income. In addition, net capital
gains attributable to the sale of depreciable real property held for more than
12 months is subject to a 25% maximum federal income tax rate to the extent of
previously claimed real property depreciation.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares in respect of which the distributions
were made, but rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a stockholder's
shares in respect of which the distributions were made, they will be included in
income as long-term capital gain (or short-term capital gain if the shares have
been held for one year or less) provided that the shares are a capital asset in
the hands of the stockholder. In
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addition, any dividend declared by AIMCO in October, November or December of any
year and payable to a stockholder of record on a specified date in any such
month will be treated as both paid by AIMCO and received by the stockholder on
December 31 of such year, provided that the dividend is actually paid by AIMCO
during January of the following calendar year. Stockholders may not include in
their individual income tax returns any net operating losses or capital losses
of AIMCO. In general, any loss upon a sale or exchange of shares by a
stockholder who has held such shares for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss to the
extent of distributions from AIMCO required to be treated by such stockholder as
long-term capital gain.
Dispositions of AIMCO Stock
In general, under the recently enacted Internal Revenue Service
Restructuring and Reform Act of 1988, capital gains recognized by individuals
and other non-corporate taxpayers upon the sale or disposition of AIMCO Stock
will be subject to a maximum federal income tax rate of 20% if the AIMCO Stock
is held for more than 12 months and will be taxed at ordinary income rates if
the AIMCO Stock is held for 12 months or less. Capital losses recognized by a
stockholder upon the disposition of AIMCO Stock held for more than one year at
the time of disposition will be a long-term capital loss. In addition, any loss
upon a sale or exchange of shares of AIMCO Stock by a stockholder who has held
such shares for six months or less (after applying certain holding period rules)
will be treated as a long-term capital loss to the extent of distributions from
AIMCO required to be treated by such stockholder as long-term capital gain.
A redemption of the Preferred Stock will be treated under Section 302 of
the Code as a dividend subject to tax at ordinary income tax rates (to the
extent of AIMCO's current or accumulated earnings and profits), unless the
redemption satisfies certain tests set forth in Section 302(b) of the Code
enabling the redemption to be treated as a sale or exchange of the Preferred
Stock. The redemption will satisfy such test if it (i) is "substantially
disproportionate" with respect to the holder (which will not be the case if only
the Preferred Stock is redeemed, since it generally does not have voting
rights), (ii) results in a "complete termination" of the holder's stock interest
in AIMCO, or (iii) is "not essentially equivalent to a dividend" with respect to
the holder, all within the meaning of Section 302(b) of the Code. In determining
whether any of these tests have been met, shares considered to be owned by the
holder by reason of certain constructive ownership rules set forth in the Code,
as well as shares actually owned, must generally be taken into account. Because
the determination as to whether any of the alternative tests of Section 302(b)
of the Code is satisfied with respect to any particular holder of the Preferred
Stock will depend upon the facts and circumstances as of the time the
determination is made, prospective investors are advised to consult their own
tax advisors to determine such tax treatment. If a redemption of the Preferred
Stock is treated as a distribution that is taxable as a dividend, the amount of
the distribution would be measured by the amount of cash and the fair market
value of any property received by the stockholders. The stockholder's adjusted
tax basis in such redeemed Preferred Stock would be transferred to the holder's
remaining stockholdings in AIMCO. If, however, the stockholder has no remaining
stockholdings in AIMCO, such basis may, under certain circumstances, be
transferred to a related person or it may be lost entirely.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. federal income
and estate tax consequences of the ownership and disposition of AIMCO Stock
applicable to Non-U.S. Holders of AIMCO Stock. A "Non-U.S. Holder" is any person
other than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof or the District of Columbia, (iii) an
estate whose income is includible in gross income for U.S. federal income tax
purposes regardless of its source or (iv) a trust if a United States court is
able to exercise primary supervision over the administration of such trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of such trust. The discussion is based on current law and
is for general information only. The discussion addresses only certain and not
all aspects of U.S. federal income and estate taxation.
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Ordinary Dividends
The portion of dividends received by Non-U.S. Holders payable out of
AIMCO's earnings and profits which are not attributable to capital gains of
AIMCO and which are not effectively connected with a U.S. trade or business of
the Non-U.S. Holder will be subject to U.S. withholding tax at the rate of 30%
(unless reduced by treaty). In general, Non-U.S. Holders will not be considered
engaged in a U.S. trade or business solely as a result of their ownership of
AIMCO Stock. In cases where the dividend income from a Non-U.S. Holder's
investment in AIMCO Stock is (or is treated as) effectively connected with the
Non-U.S. Holder's conduct of a U.S. trade or business, the Non-U.S. Holder
generally will be subject to U.S. tax at graduated rates, in the same manner as
U.S. Holders are taxed with respect to such dividends (and may also be subject
to the 30% branch profits tax in the case of a Non-U.S. Holder that is a
corporation).
Non-Dividend Distributions
Unless AIMCO Stock constitutes a United States Real Property Interest (a
"USRPI"), distributions by AIMCO which are not dividends out of the earnings and
profits of AIMCO will not be subject to U.S. income or withholding tax. If it
cannot be determined at the time a distribution is made whether or not such
distribution will be in excess of current and accumulated earnings and profits,
the distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Holder may seek a refund of such amounts from
the IRS if it is subsequently determined that such distribution was, in fact, in
excess of current and accumulated earnings and profits of AIMCO. If AIMCO Stock
constitutes a USRPI, such distributions will be subject to 10% withholding and
taxed pursuant to the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA") at a rate of 35% to the extent such distributions exceed a
stockholder's basis in his or her AIMCO Stock.
Capital Gain Dividends
Under FIRPTA, a distribution made by AIMCO to a Non-U.S. Holder, to the
extent attributable to gains from dispositions of USRPIs such as the properties
beneficially owned by AIMCO ("USRPI Capital Gains"), will be considered
effectively connected with a U.S. trade or business of the Non-U.S. Holder and
subject to U.S. income tax at the rates applicable to U.S. individuals or
corporations, without regard to whether such distribution is designated as a
capital gain dividend. In addition, AIMCO will be required to withhold tax equal
to 35% of the amount of dividends to the extent such dividends constitute USRPI
Capital Gains. Distributions subject to FIRPTA may also be subject to a 30%
branch profits tax in the hands of Non-U.S. Holder that is a corporation.
Dispositions of AIMCO Stock
Unless AIMCO Stock constitutes a USRPI, a sale of such stock by a Non-U.S.
Holder generally will not be subject to U.S. taxation under FIRPTA. The stock
will not constitute a USRPI if AIMCO is a "domestically controlled REIT." A
domestically controlled REIT is a REIT in which, at all times during a specified
testing period, less than 50% in value of its shares is held directly or
indirectly by Non-U.S. Holders. AIMCO believes that it is, and it expects to
continue to be, a domestically controlled REIT and, therefore, the sale of AIMCO
Stock should not be subject to taxation under FIRPTA. Because the Class A Common
Stock is publicly traded, however, no assurance can be given that AIMCO is or
will continue to be a domestically controlled REIT.
If AIMCO does not constitute a domestically controlled REIT, a Non-U.S.
Holder's sale of stock generally will still not be subject to tax under FIRPTA
as a sale of a USRPI provided that (i) the stock is "regularly traded" (as
defined by applicable Treasury Regulations) on an established securities market
(e.g., the NYSE, on which AIMCO Class A Common Stock is listed) and (ii) the
selling Non-U.S. Holder held 5% or less of AIMCO's outstanding stock at all
times during a specified testing period.
If gain on the sale of stock of AIMCO were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals)
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and the purchaser of the stock could be required to withhold 10% of the purchase
price and remit such amount to the IRS.
Gain from the sale of AIMCO Stock that would not otherwise be subject to
FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Holder in
two cases: (i) if the Non-U.S. Holder's investment in the AIMCO Stock is
effectively connected with a U.S. trade or business conducted by such Non-U.S.
Holder, the Non-U.S. Holder will be subject to the same treatment as a U.S.
stockholder with respect to such gain, or (ii) if the Non-U.S. Holder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gain.
Estate Tax
AIMCO Stock owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for U.S. federal estate tax purposes) of the
United States at the time of death will be includible in the individual's gross
estate for U.S. federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise. Such individual's estate may be subject to U.S.
federal estate tax on the property includible in the estate for U.S. federal
estate tax purposes.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
AIMCO will report to its U.S. stockholders and to the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be subject to backup
withholding at the rate of 31% with respect to distributions paid unless such
holder (i) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with the applicable requirements of the backup withholding
rules. A stockholder who does not provide AIMCO with his correct taxpayer
identification number also may be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. In addition, AIMCO may be required to withhold a portion
of capital gain distributions to any Non-U.S. Holders who fail to certify their
foreign status to AIMCO. The IRS has issued final Treasury Regulations regarding
the backup withholding rules as applied to Non-U.S. Holders. Those final
Treasury Regulations alter the current system of backup withholding compliance
and will be effective for payments made after December 31, 1999. Prospective
investors in AIMCO Stock should consult their tax advisors regarding the
application of these Treasury Regulations.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, amounts distributed by AIMCO to Exempt Organizations should generally
not constitute UBTI. However, if an Exempt Organization finances its acquisition
of the AIMCO Stock with debt, a portion of its income from AIMCO will constitute
UBTI pursuant to the "debt-financed property" rules. Furthermore, social clubs,
voluntary employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans that are exempt from taxation
under paragraphs (7), (9), (17) and (20), respectively, of Section 501(c) of the
Code are subject to different UBTI rules, which generally will require them to
characterize distributions from AIMCO as UBTI. In addition, in certain
circumstances, a pension trust that owns more than 10% of AIMCO's stock is
required to treat a percentage of the dividends from AIMCO as UBTI (the "UBTI
Percentage"). The UBTI Percentage is the gross income derived by AIMCO from an
unrelated trade or business (determined as if AIMCO were a pension trust)
divided by the gross income of AIMCO for the year in which the dividends are
paid. The UBTI rule applies to a pension trust holding more than 10% of
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AIMCO's stock only if (i) the UBTI Percentage is at least 5%, (ii) AIMCO
qualifies as a REIT by reason of the modification of the 5/50 Rule that allows
the beneficiaries of the pension trust to be treated as holding shares of AIMCO
in proportion to their actuarial interest in the pension trust, and (iii) either
(A) one pension trust owns more than 25% of the value of AIMCO's stock or (B) a
group of pension trusts each individually holding more than 10% of the value of
AIMCO's stock collectively owns more that 50% of the value of AIMCO's stock. The
restrictions on ownership and transfer of AIMCO's stock should prevent an Exempt
Organization from owning more than 10% of the value of AIMCO's stock.
FEDERAL INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP
AND OP UNITHOLDERS
The following is a summary of certain federal income tax consequences
resulting from the acquisition of, holding, exchanging, and otherwise disposing
of OP Units. This discussion is based upon the Code, the Treasury Regulations,
rulings issued by the IRS, and judicial decisions, all in effect as of the date
of this Registration Statement and all of which are subject to change, possibly
retroactively. Such summary is also based on the assumptions that the operation
of AIMCO, the AIMCO Operating Partnership and the Subsidiary Partnerships will
be in accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of federal income taxation which may be important to a
particular investor in light of its investment or tax circumstances, or to
certain types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States federal income tax purposes). This summary assumes that
investors will hold their OP Units as "capital assets' (generally, property held
for investment). No advance ruling has been or will be sought from the IRS
regarding any matter discussed in this Registration Statement.
THE FEDERAL INCOME TAX TREATMENT OF HOLDERS OF OP UNITS DEPENDS IN SOME
INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF
FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE
AVAILABLE. ACCORDINGLY, EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING,
HOLDING, EXCHANGING, OR OTHERWISE DISPOSING OF OP UNITS AND OF AIMCO'S ELECTION
TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES, AS A REAL ESTATE
INVESTMENT TRUST.
PARTNERSHIP STATUS
AIMCO has received an opinion of Counsel to the effect that the AIMCO
Operating Partnership is classified as a partnership for federal income tax
purposes, and not as an association taxable as a corporation. It must be
emphasized that this opinion of Counsel is based on and conditioned upon ceratin
assumptions and representations and on opinions of local counsel with respect to
matters of local law. The opinion is expressed as of its date and Counsel has no
obligation to advise AIMCO of any subsequent change in matters stated,
represented or assumed or any subsequent change in the applicable law. An
opinion of Counsel is not binding on the IRS, and no assurance can be given that
the IRS will not challenge the status of the AIMCO Operating Partnership as a
partnership.
Some partnerships are, for federal income tax purposes, characterized not
as a partnership but as an association taxable as a corporation or as a
"publicly traded partnership" taxable as a corporation. A partnership will be
classified as a publicly traded partnership if interests therein are traded on
an "established securities market" or are "readily tradable" on a "secondary
market (or the substantial equivalent thereof)."
The AIMCO Operating Partnership believes and intends to take the position
that the AIMCO Operating Partnership should not be classified as a publicly
traded partnership because (i) the OP Units are not traded on an established
securities market and (ii) the OP Units should not be considered readily
tradable on a secondary market or the substantial equivalent thereof. The
determination of whether interests in a partnership are readily tradable on a
secondary market or the substantial equivalent thereof, however, depends
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on various facts and circumstances (including facts that are not within the
control of the AIMCO Operating Partnership). Treasury Regulations generally
effective for taxable years beginning after December 31, 1995 (the "PTP
Regulations") provide limited safe harbors, which, if satisfied, will prevent a
partnership's interests from being treated as readily tradable on a secondary
market or the substantial equivalent thereof. Under a grandfather rule, certain
existing partnerships may rely on safe harbors contained in IRS Notice 88-75
rather than on the safe harbors contained in the PTP Regulations for all taxable
years of the partnership beginning before January 1, 2006. The AIMCO Operating
Partnership believes that it is subject to such grandfather rule and that it
cannot rely on the safe harbors contained in the PTP Regulations. The AIMCO
Operating Partnership may not have satisfied any of the safe harbors in Notice
88-75 in its previous tax years. In addition, because the AIMCO Operating
Partnership's ability to satisfy a safe harbor in Notice 88-75 (or to the extent
applicable, a safe harbor in the PTP Regulations) may involve facts that are not
within its control, it is impossible to predict whether the AIMCO Operating
Partnership will satisfy a safe harbor in future tax years. The safe harbors in
Notice 88-75 are not intended to be substantive rules for the determination of
whether partnership interests are readily tradable on a secondary market or the
substantial equivalent thereof, and consequently, the failure to meet these safe
harbors will not necessarily cause the AIMCO Operating Partnership to be treated
as a publicly traded partnership. No assurance can be given, however, that the
IRS will not assert that partnerships such as the AIMCO Operating Partnership
constitute publicly traded partnerships, or that facts and circumstances will
not develop which could result in the AIMCO Operating Partnership being treated
as a publicly traded partnership.
If the AIMCO Operating Partnership were characterized as a publicly traded
partnership, it would nevertheless not be taxable as a corporation as long as
90% or more of its gross income consists of "qualifying income." In general,
qualifying income includes interest, dividends, real property rents (as defined
by section 856 of the Code) and gain from the sale or disposition of real
property. The AIMCO Operating Partnership believes that more than 90% of its
gross income consists of qualifying income and expects that more than 90% of its
gross income in future tax years will consist of qualifying income. In such
event, even if the AIMCO Operating Partnership were characterized as a publicly
traded partnership, it would not be taxable as a corporation. If the AIMCO
Operating Partnership were characterized as a publicly traded partnership,
however, each OP Unitholder would be subject to special rules under section 469
of the Code. See "Limitations on Deductibility of Losses -- Passive Activity
Loss Limitation." No assurance can be given that the actual results of the AIMCO
Operating Partnership's operations for any one taxable year will enable it to
satisfy the qualifying income exception.
If the AIMCO Operating Partnership were characterized as an association or
publicly traded partnership taxable as a corporation (because it did not meet
the qualifying income exception discussed above), it would be subject to tax at
the entity level as a regular corporation and OP Unitholders would be subject to
tax in the same manner as stockholders of a corporation. Thus, the AIMCO
Operating Partnership would be subject to federal tax (and possibly state and
local taxes) on its net income, determined without reduction for any
distributions made to the OP Unitholders, at regular federal corporate income
tax rates, thereby reducing the amount of any cash available for distribution to
the OP Unitholders, which reduction could also materially and adversely impact
the liquidity and value of the OP Units. In addition, the AIMCO Operating
Partnership's items of income, gain, loss, deduction and credit would not be
passed through to the OP Unitholders and the OP Unitholders would not be subject
to tax on the income earned by the AIMCO Operating Partnership. Distributions
received by an OP Unitholder from the AIMCO Operating Partnership, however,
would be treated as dividend income for federal income tax purposes, subject to
tax as ordinary income to the extent of current and accumulated earnings and
profits of the AIMCO Operating Partnership, and the excess, if any, as a
nontaxable return of capital to the extent of the OP Unitholder's adjusted tax
basis in his AIMCO Operating Partnership interest (without taking into account
Partnership liabilities), and thereafter as gain from the sale of a capital
asset. Characterization of the AIMCO Operating Partnership as an association or
publicly traded partnership taxable as a corporation would also result in the
termination of AIMCO's status as a REIT for federal income tax purposes which
would have a material adverse impact on AIMCO. See "Federal Income Taxation of
AIMCO and AIMCO Stockholders -- Tax Aspects of AIMCO's Investments in
Partnerships."
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No assurances can be given that the IRS would not challenge the status of
the AIMCO Operating Partnership as a "partnership" which is not "publicly
traded" for federal income tax purposes or that a court would not reach a result
contrary to such positions. Accordingly, each prospective investor is urged to
consult his tax advisor regarding the classification and treatment of the AIMCO
Operating Partnership as a "partnership" for federal income tax purposes.
The following discussion assumes that the AIMCO Operating Partnership is,
and will continue to be, classified and taxed as a partnership for federal
income tax purposes.
TAXATION OF OP UNITHOLDERS
In general, a partnership is treated as a "pass-through" entity for federal
income tax purposes and is not itself subject to federal income taxation. Each
partner of a partnership, however, is subject to tax on his allocable share of
partnership tax items, including partnership income, gains, losses, deductions,
and credits ("Partnership Tax Items") for each taxable year of the partnership
ending within or with such taxable year of the partner, regardless of whether he
receives any actual distributions from the partnership during the taxable year.
Generally, the characterization of any particular Partnership Tax Item is
determined at the partnership, rather than at the partner level, and the amount
of a partner's allocable share of such item is governed by the terms of the
partnership agreement.
No federal income tax will be payable by the AIMCO Operating Partnership.
Instead, each OP Unitholder will be (i) required to include in income his
allocable share of any AIMCO Operating Partnership income or gains and (ii)
entitled to deduct his allocable share of any AIMCO Operating Partnership
deductions or losses, but only to the extent of the OP Unitholder's adjusted tax
basis in his AIMCO Operating Partnership interest and subject to the "at risk"
and "passive activity loss" rules discussed below under the heading "Limitations
on the Deductibility of Losses." An OP Unitholder's allocable share of the AIMCO
Operating Partnership's taxable income may exceed the cash distributions to the
OP Unitholder for any year if the AIMCO Operating Partnership retains its
profits rather than distributing them.
ALLOCATIONS OF AIMCO OPERATING PARTNERSHIP PROFITS AND LOSSES
For federal income tax purposes, an OP Unitholder's allocable share of the
AIMCO Operating Partnership's Partnership Tax Items will be determined by the
AIMCO Operating Partnership Agreement if such allocations either have
"substantial economic effect" or are determined to be in accordance with the OP
Unitholder's interests in the AIMCO Operating Partnership. The manner in which
Partnership Tax Items of the AIMCO Operating Partnership are allocated is
described above under the heading "Description of OP Units--Allocations of Net
Income and Net Loss." If the allocations provided by the AIMCO Operating
Partnership Agreement were successfully challenged by the IRS, the
redetermination of the allocations to a particular OP Unitholder for federal
income tax purposes may be less favorable than the allocation set forth in the
AIMCO Operating Partnership Agreement.
TAX BASIS OF A PARTNERSHIP INTEREST
A partner's adjusted tax basis in his partnership interest is relevant,
among other things, for determining (i) gain or loss upon a taxable disposition
of his partnership interest, (ii) gain upon the receipt of partnership
distributions, and (iii) the limitations imposed on the use of partnership
deductions and losses allocable to such partner. Generally, the adjusted tax
basis of an OP Unitholder's interest in the AIMCO Operating Partnership is equal
to (A) the sum of the adjusted tax basis of the property contributed by the OP
Unitholder to the AIMCO Operating Partnership in exchange for an interest in the
AIMCO Operating Partnership and the amount of cash, if any, contributed by the
OP Unitholder to the AIMCO Operating Partnership, (B) reduced, but not below
zero, by the OP Unitholder's allocable share of AIMCO Operating Partnership
distributions, deductions, and losses, (C) increased by the OP Unitholder's
allocable share of AIMCO Operating Partnership income and gains, and (D)
increased by the OP Unitholder's allocable share of the AIMCO Operating
Partnership liabilities and decreased by the OP Unitholder's liabilities assumed
by the AIMCO Operating Partnership.
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CASH DISTRIBUTIONS
Cash distributions received from a partnership do not necessarily correlate
with income earned by the partnership as determined for federal income tax
purposes. Thus, an OP Unitholder's federal income tax liability in respect of
his allocable share of the AIMCO Operating Partnership taxable income for a
particular taxable year may exceed the amount of cash, if any, received by the
OP Unitholder from the AIMCO Operating Partnership during such year.
If cash distributions, including a "deemed" cash distribution as discussed
below, received by an OP Unitholder in any taxable year exceed his allocable
share of the AIMCO Operating Partnership taxable income for the year, the excess
will constitute, for federal income tax purposes, a return of capital to the
extent of such OP Unitholder's adjusted tax basis in his AIMCO Operating
Partnership interest. Such return of capital will not be includible in the
taxable income of the OP Unitholder, for federal income tax purposes, but it
will reduce, but not below zero, the adjusted tax basis of the AIMCO Operating
Partnership interest held by the OP Unitholder. If an OP Unitholder's tax basis
in his AIMCO Operating Partnership interest is reduced to zero, a subsequent
cash distribution received by the OP Unitholder will be subject to tax as
capital gain income, but only if, and to the extent that, such distribution
exceeds the subsequent positive adjustments, if any, to the tax basis of the OP
Unitholder's AIMCO Operating Partnership interest as determined at the end of
the taxable year during which such distribution is received. A decrease in an OP
Unitholder's share of the AIMCO Operating Partnership liabilities resulting from
the payment or other settlement of such liabilities is generally treated, for
federal income tax purposes, as a deemed cash distribution. A decrease in an OP
Unitholder's percentage interest in the AIMCO Operating Partnership, because of
the issuance by the AIMCO Operating Partnership of additional OP Units, or
otherwise, will decrease an OP Unitholder's share of nonrecourse liabilities of
the AIMCO Operating Partnership, if any, and thus, will result in a
corresponding deemed distribution of cash.
A non-pro rata distribution (or deemed distribution) of money or property
may result in ordinary income to an OP Unitholder, regardless of such OP
Unitholder's tax basis in his OP Units, if the distribution reduces such OP
Unitholder's share of the AIMCO Operating Partnership's "Section 751 Assets."
"Section 751 Assets" are defined by the Code to include "unrealized receivables"
or "substantially appreciated inventory". For this purpose, inventory is
substantially appreciated if its value exceeds 120% of its adjusted basis. Among
other things, "unrealized receivables" include amounts attributable to
previously claimed depreciation deductions on certain types of property. To the
extent that such a reduction in an OP Unitholder's share of Section 751 Assets
occurs, the AIMCO Operating Partnership will be deemed to have distributed a
proportionate share of the Section 751 Assets to the OP Unitholder followed by a
deemed exchange of such assets with the AIMCO Operating Partnership in return
for the non-pro rata portion of the actual distribution made to such OP
Unitholder. This deemed exchange will generally result in the realization of
ordinary income under Section 751(b) by the OP Unitholder. Such income will
equal the excess of (1) the non-pro rata portion of such distribution over (2)
the OP Unitholder's tax basis in such OP Unitholder's share of such Section 751
Assets deemed relinquished in the exchange.
TAX CONSEQUENCES UPON CONTRIBUTION OF PROPERTY TO THE AIMCO OPERATING
PARTNERSHIP
Generally, Section 721 of the Code provides that neither the Contributing
Partner nor the AIMCO Operating Partnership will recognize a gain or loss, for
federal income tax purposes, upon a contribution of property to the AIMCO
Operating Partnership in exchange for OP Units. Notwithstanding this general
rule of nonrecognition, the Contributing Partner may recognize a gain where the
property transferred is subject to liabilities, or the AIMCO Operating
Partnership assumes liabilities in connection with a transfer of property, and
the amount of such liabilities exceeds the amount of the AIMCO Operating
Partnership liabilities allocated to the Contributing Partner as determined
immediately after the transfer. Such excess is treated by the Contributing
Partner, for federal income tax purposes, as the receipt of a deemed
distribution of cash to the Contributing Partner from the AIMCO Operating
Partnership. If a person transfers to the AIMCO Operating Partnership an
interest in another partnership (the "Underlying Partnership") in exchange for
an OP Unit, the person will be treated, for federal income tax purposes, as
having transferred to the AIMCO Operating Partnership his allocable share of the
liabilities of the Underlying Partnership, which could result in,
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or increase the amount of, a deemed cash distribution. As discussed above, such
deemed cash distributions are generally treated as a nontaxable return of
capital to the extent of the Contributing Partner's adjusted tax basis in his OP
Units and thereafter as gain from the sale of such partnership interest.
If a Contributing Partner receives or is deemed to receive for federal
income tax purposes, cash in addition to OP Units upon the contribution of
property to the AIMCO Operating Partnership, the transaction will likely be
treated as part contribution of property and part sale of property. In such
event, the Contributing Partner will recognize gain or loss with respect to the
portion of the property that is deemed sold to the AIMCO Operating Partnership.
If a Contributing Partner transfers property to the AIMCO Operating
Partnership in exchange for an OP Unit and the adjusted tax basis of such
property differs from its fair market value, AIMCO Operating Partnership Tax
Items must be allocated in a manner such that the Contributing Partner is
charged with, or benefits from, respectively, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. Where a
partner contributes cash to a partnership that holds appreciated property, the
Treasury Regulations provide for a similar allocation of such items to the other
partners. These rules may apply to a contribution by AIMCO to the AIMCO
Operating Partnership of cash proceeds received by AIMCO from the offering of
its stock. Such allocations are solely for federal income tax purposes and do
not affect the book capital accounts or other economic or legal arrangements
among the OP Unitholders. The general purpose underlying this provision is to
specially allocate certain Partnership Tax Items in order to place both the
noncontributing and Contributing Partners in the same tax position that they
would have been in had the Contributing Partner contributed property with an
adjusted tax basis equal its fair market value. Treasury Regulations provide the
AIMCO Operating Partnership with several alternative methods and allow the AIMCO
Operating Partnership to adopt any other reasonable method to make allocations
to reduce or eliminate Book-Tax Differences. The AIMCO GP, in its discretion and
in a manner consistent with the Treasury Regulations, will select and adopt a
method of allocating AIMCO Operating Partnership Tax Items, including the
remedial allocation method, for purposes of eliminating such disparities.
In general, certain OP Unitholders will be allocated lower amounts of
depreciation deductions for tax purposes and increased amounts of taxable income
and gain on the sale by the AIMCO Operating Partnership or other Subsidiary
Partnerships of the contributed properties. Accordingly, in the event the AIMCO
Operating Partnership disposes of contributed property, income attributable to
the Book-Tax Difference of such contributed property generally will be allocated
to the Contributing Partner, and the other OP Unitholders generally will be
allocated only their share of gains attributable to appreciation, if any,
occurring after the contribution of the contributed property. These incremental
allocations of income will not result in additional cash distributions to the
Contributing Partner, with the result that the Contributing Partner may not
necessarily receive cash sufficient to pay the taxes attributable to such
income. These allocations will tend to eliminate the Book-Tax Differences with
respect to the contributed property over the life of the AIMCO Operating
Partnership. However, the special allocation rules of Section 704(c) do not
always entirely rectify the Book-Tax Difference on an annual basis or with
respect to a specific taxable transaction such as a sale. Thus, the carryover
basis of the contributed property in the hands of the AIMCO Operating
Partnership may cause a noncontributing OP Unitholder to be allocated lower
amounts of depreciation and other deductions for tax purposes than would be
allocated to such OP Unitholder if the contributed property had a tax basis
equal to its fair market value at the time of contribution, and possibly to be
allocated taxable gain in the event of a sale of the contributed property in
excess of the economic or book income allocated to it as a result of such sale.
This may cause noncontributing OP Unitholders to recognize taxable income in
excess of cash proceeds.
LIMITATIONS ON DEDUCTIBILITY OF LOSSES
Basis Limitation. To the extent that an OP Unitholder's allocable share of
AIMCO Operating Partnership deductions and losses exceeds his adjusted tax basis
in his AIMCO Operating Partnership interest at the end of the of the taxable
year in which the losses and deductions flow through, the excess losses and
deductions cannot be utilized, for federal income tax purposes, by the OP
Unitholder in such year. The excess losses and deductions may, however, be
utilized in the first succeeding taxable year in which, and to the extent
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that, there is an increase in the tax basis of the AIMCO Operating Partnership
interest held by such OP Unitholder, but only to the extent permitted under the
"at risk" and "passive activity loss" rules discussed below.
"At Risk" Limitation. Under the "at risk" rules of section 465 of the Code,
a noncorporate taxpayer and a closely held corporate taxpayer are generally not
permitted to claim a deduction, for federal income tax purposes, in respect of a
loss from an activity, whether conducted directly by the taxpayer or through an
investment in a partnership, to the extent that the loss exceeds the aggregate
dollar amount which the taxpayer has "at risk" in such activity at the close of
the taxable year. To the extent that losses are not permitted to be used in any
taxable year, such losses may be carried over to subsequent taxable years and
may be claimed as a deduction by the taxpayer if, and to the extent that, the
amount which the taxpayer has "at risk" is increased. Provided certain
requirements are met, the at risk rules generally do not apply to losses arising
from any activity which constitutes "the holding of real property," which the
holding of an OP Unit should constitute.
"Passive Activity Loss" Limitation. The passive activity loss rules of
section 469 of the Code limit the use of losses derived from passive activities,
which generally includes an investment in limited partnership interests such as
the OP Units. If an investment in an OP Unit is treated as a passive activity,
an OP Unitholder who is an individual investor, as well as certain other types
of investors, would not be able to use losses from the AIMCO Operating
Partnership to offset nonpassive activity income, including salary, business
income, and portfolio income (e.g., dividends, interest, royalties, and gain on
the disposition of portfolio investments) received during the taxable year.
Passive activity losses that are disallowed for a particular taxable year may,
however, be carried forward to offset passive activity income earned by the OP
Unitholder in future taxable years. In addition, such disallowed losses may be
claimed as a deduction, subject to the basis and at risk limitations discussed
above, upon a taxable disposition of an OP Unit by the OP Unitholder, regardless
of whether such OP Unitholder has received any passive activity income during
the year of disposition.
If the AIMCO Operating Partnership were characterized as a publicly traded
partnership, each OP Unitholder would be required to treat any loss derived from
the AIMCO Operating Partnership separately from any income or loss derived from
any other publicly traded partnership, as well as from income or loss derived
from other passive activities. In such case, any net losses or credits
attributable to the AIMCO Operating Partnership which are carried forward may
only be offset against future income of the AIMCO Operating Partnership.
Moreover, unlike other passive activity losses, suspended losses attributable to
the AIMCO Operating Partnership would only be allowed upon the complete
disposition of the OP Unitholder's "entire interest" in the AIMCO Operating
Partnership (rather than upon the disposition of an interest in an "activity").
SECTION 754 ELECTION
The AIMCO Operating Partnership has made the election permitted by Section
754 of the Code. Election is irrevocable without the consent of the IRS. The
election will generally permit a purchaser of OP Units, such as AIMCO when it
acquires AIMCO OP Units from OP Unitholders, to adjust its share of the basis in
the AIMCO Operating Partnership's properties pursuant to Section 743(b) of the
Code to fair market value (as reflected by the value of consideration paid for
the OP Units), as if such purchaser had acquired a direct interest in the AIMCO
Operating Partnership assets. The Section 743(b) adjustment is attributed solely
to a purchaser of OP Units and is not added to the bases of the AIMCO Operating
Partnership's assets associated with all of the OP Unitholders in the AIMCO
Operating Partnership.
DEPRECIATION
Section 168(i)(7) of the Code provides that in the case of property
transferred to a partnership in a Section 721 transaction, the transferee shall
be treated as the transferor for purposes of computing the depreciation
deduction with respect to so much of the basis in the hands of the transferee as
does not exceed the adjusted basis in the hands of the transferor. The effect of
this rule would be to continue the historic basis, placed in service dates and
methods with respect to the depreciation of the properties being contributed by
a
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Contributing Partner to the AIMCO Operating Partnership in exchange for OP
Units. However, an acquiror of OP Units that obtains a Section 743(b) adjustment
by reason of such acquisition (see "Section 754 Election," above) generally will
be allowed depreciation with respect to such adjustment beginning as of the date
of the exchange as if it were new property placed in service as of that date.
SALE, REDEMPTION, OR EXCHANGE OF OP UNITS
An OP Unitholder will recognize a gain or loss upon a sale of an OP Unit, a
redemption of an OP Unit for cash, an exchange of an OP Unit for shares of AIMCO
Stock, or other taxable disposition of an OP Unit. Gain or loss recognized upon
a sale or exchange of an OP Unit will be equal to the difference between (i) the
sum of the amount realized in the transaction, which, in the case of the receipt
of shares of AIMCO Stock will be an amount equal to their fair market value at
the time that the transaction is consummated, plus the amount of AIMCO Operating
Partnership liabilities allocable to the OP Unit at such time and (ii) the OP
Unitholder's tax basis in the OP Unit disposed of, which tax basis will be
adjusted for the OP Unitholder's allocable share of the AIMCO Operating
Partnership's income or loss for the taxable year of the disposition. In the
case of a gift of an OP Unit, an OP Unitholder will be deemed to have an amount
realized equal to the amount of the AIMCO Operating Partnership's nonrecourse
liabilities allocable to such OP Unit, and to the extent that the amount
realized exceeds the OP Unitholder's basis for the OP Unit disposed of, such OP
Unitholder will recognize gain for federal income tax purposes. The tax
liability resulting from the gain recognized on a disposition of an OP Unit
could exceed the amount of cash and the fair market value of property received.
If the AIMCO Operating Partnership redeems an OP Unitholder's OP Units for
cash (which is not contributed by AIMCO to effect the redemption), the tax
consequences generally would be the same as described in the preceding
paragraphs, except that if the AIMCO Operating Partnership redeems less than all
of an OP Unitholder's OP Units, the OP Unitholder would recognize no taxable
loss and would recognize taxable gain only to the extent that the cash, plus the
amount of AIMCO Operating Partnership liabilities allocable to the redeemed OP
Units, exceeded the OP Unitholder's adjusted tax basis in all of such OP
Unitholder's OP Units immediately before the redemption.
Under the recently enacted Internal Revenue Service Restructuring and
Reform Act of 1988, capital gains recognized by individuals and certain other
noncorporate taxpayers upon the sale or disposition of an OP Unit will be
subject to a maximum federal income tax rate of 20% if the OP Unit is held for
more than 12 months and will be taxed at ordinary income tax rates if the OP
Unit is held for 12 months or less. Generally, gain or loss recognized by an OP
Unitholder on the sale or other taxable disposition of an OP Unit will be
taxable as capital gain or loss. However, to the extent that the amount realized
upon the sale or other taxable disposition of an OP Unit attributable to an OP
Unitholder's share of "unrealized receivables" of the AIMCO Operating
Partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
amounts attributable to previously claimed depreciation deductions on certain
types of property. In addition, the maximum federal income tax rate for net
capital gains attributable to the sale of depreciable real property (which may
be determined to include an interest in a partnership such as the AIMCO
Operating Partnership) held for more than 12 months is currently 25% (rather
than 20%) to the extent of previously claimed depreciation deductions that would
not be treated as "unrealized receivables."
TERMINATION OF THE AIMCO OPERATING PARTNERSHIP
In the event of the dissolution of the AIMCO Operating Partnership, a
distribution of AIMCO Operating Partnership property (other than money and
marketable securities) will not result in taxable gain to an OP Unitholder
(except to the extent provided in Section 737 of the Code for liquidations
occurring within seven years of the date of contribution by an OP Unitholder of
property to the AIMCO Operating Partnership), and the OP Unitholder will hold
such distributed property with a basis equal to the adjusted basis of such OP
Units exchanged therefor, reduced by any money distributed in liquidation.
Further, the liquidation of the AIMCO Operating Partnership will be taxable to a
holder of Units to the extent that the value of any money and marketable
securities distributed in liquidation (including any money deemed distributed as
a result of relief from liabilities) exceeds such OP Unitholder's tax basis in
his OP Units.
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ALTERNATIVE MINIMUM TAX
The Code contains different sets of minimum tax rules applicable to
corporate and noncorporate investors. The discussion below relates only to the
alternative minimum tax applicable to noncorporate taxpayers. Accordingly,
corporate investors should consult with their tax advisors with respect to the
effect of the corporate minimum tax provisions that may be applicable to them.
Noncorporate taxpayers are subject to an alternative minimum tax to the extent
the tentative minimum tax ("TMT") exceeds the regular income tax otherwise
payable. The rate of tax imposed on the alternative minimum taxable income
("AMTI") in computing TMT is 26% on the first $175,000 of alternative minimum
taxable income in excess of an exemption amount and 28% on any additional
alternative minimum taxable income of noncorporate investors. In general, AMTI
consists of the taxpayer's taxable income, determined with certain adjustments,
plus his items of tax preference. For example, alternative minimum taxable
income is calculated using an alternative cost recovery (depreciation) system
that is not as favorable as the methods provided for under Section 168 of the
Code which the AIMCO Operating Partnership will use in computing its income for
regular federal income tax purposes. Accordingly, an OP Unitholder's AMTI
derived from the AIMCO Operating Partnership may be higher than such OP
Unitholder's share of the AIMCO Operating Partnership's net taxable income.
Prospective investors should consult with their tax advisors as to the impact of
an investment in OP Units on their liability for the alternative minimum tax.
INFORMATION RETURNS AND AUDIT PROCEDURES
The AIMCO Operating Partnership will use all reasonable efforts to furnish
to each OP Unitholder within 90 days after the close of each taxable year of the
AIMCO Operating Partnership, certain tax information, including a Schedule K-1,
which sets forth each OP Unitholder's allocable share of the AIMCO Operating
Partnership's Taxable Items. In preparing this information the AIMCO GP will use
various accounting and reporting conventions to determine the respective OP
Unitholder's allocable share of Partnership Tax Items. There is no assurance
that any such conventions will yield a result which conforms to the requirements
of the Code, the Treasury Regulations or administrative interpretations of the
IRS. The AIMCO GP cannot assure a current or prospective OP Unitholder that the
IRS will not successfully contend in court that such accounting and reporting
conventions are impermissible.
No assurance can be given that the AIMCO Operating Partnership will not be
audited by the IRS or that tax adjustments will not be made. Further, any
adjustments in the AIMCO Operating Partnership's tax returns will lead to
adjustments in OP Unitholders' tax returns and may lead to audits of their
returns and adjustments of items unrelated to the AIMCO Operating Partnership.
Each OP Unitholder would bear the cost of any expenses incurred in connection
with an examination of such OP Unitholder's personal tax return.
Partnerships generally are treated as separate entities for purposes of
federal tax audits, judicial review of administrative adjustments by the IRS and
tax settlement proceedings. The tax treatment of Partnership Tax Items generally
are determined at the partnership level in a unified partnership proceeding
rather than in separate proceedings with the partners. The Code provides for one
partner to be designated as the Tax Matters Partner for these purposes.
The Tax Matters Partner is authorized, but not required, to take certain
actions on behalf of the AIMCO Operating Partnership and OP Unitholders and can
extend the statute of limitations for assessment of tax deficiencies against OP
Unitholders with respect to the AIMCO Operating Partnership Tax Items. The Tax
Matters Partner may bind an OP Unitholder with less than a 1% profits interest
in the AIMCO Operating Partnership to a settlement with the IRS, unless such OP
Unitholder elects, by filing a statement with the IRS, not to give such
authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial
review (to which all the OP Unitholders are bound) of a final partnership
administrative adjustment and, if the Tax Matters Partner fails to seek judicial
review, such review may be sought by any OP Unitholder having at least a 1%
interest in the profits of the AIMCO Operating Partnership or by OP Unitholders
having in the aggregate at least a 5% profits interest. However, only one action
for judicial review will go forward, and each OP Unitholder with an interest in
the outcome may participate.
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TAXATION OF FOREIGN OP UNITHOLDERS
A Non-U.S. Holder will be considered to be engaged in a United States trade
or business on account of its ownership of an OP Unit. As a result, a Non-U.S.
Holder will be required to file federal tax returns with respect to its
allocable share of the AIMCO Operating Partnerships income which is effectively
connected to its trade or business. A Non-U.S. Holder that is a corporation may
also be subject to United States branch profit tax at a rate of 30%, in addition
to regular federal income tax, on its allocable share of such income. Such a tax
may be reduced or eliminated by an income tax treaty between the United States
and the country with respect to which the Non-U.S. Holder is resident for tax
purposes. Non-U.S. Holders are advised to consult their tax advisors regarding
the effects an investment in the AIMCO Operating Partnership may have on
information return requirements and other United States and non-United States
tax matters, including the tax consequences of an investment in the AIMCO
Operating Partnership for the country or other jurisdiction of which such
Non-U.S. Holder is a citizen or in which such Non-U.S. Holder resides or is
otherwise located.
OTHER TAX CONSEQUENCES
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the U.S.
Treasury Department. Changes to the federal laws and interpretations thereof
could adversely affect an investment in AIMCO or the AIMCO Operating
Partnership. For example, a proposal issued by President Clinton on February 2,
1998, if enacted into law, may adversely affect the ability of AIMCO to expand
the present activities of its Management Subsidiaries. It cannot be predicted
whether, when, in what forms, or with what effective dates, the tax laws
applicable to AIMCO or the AIMCO Operating Partnership, or an investment in
AIMCO or the AIMCO Operating Partnership, will be changed.
STATE, LOCAL AND FOREIGN TAXES
The AIMCO Operating Partnership, OP Unitholders, AIMCO and AIMCO
stockholders may be subject to state, local or foreign taxation in various
jurisdictions, including those in which it or they transact business, own
property or reside. It should be noted that the AIMCO Operating Partnership owns
properties located in a number of states and local jurisdictions, and the AIMCO
Operating Partnership and OP Unitholders may be required to file income tax
returns in some or all of those jurisdictions. The state, local or foreign tax
treatment of the AIMCO Operating Partnership and OP Unitholders and of AIMCO and
its stockholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective investors should consult their own
tax advisors regarding the application and effect of state, local foreign tax
laws on an investment in the AIMCO Operating Partnership or AIMCO.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made by Apartment Investment and
Management Company with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until our offering is completed.
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- Apartment Investment and Management Company's Annual Report on Form
10-K/A for the year ended December 31, 1997;
- Apartment Investment and Management Company's Quarterly Reports on
Form 10-Q/A and Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998, respectively;
- Apartment Investment and Management Company's Current Reports on Form
8-K, dated December 23, 1997 (and Amendment No. 1 thereto filed
February 6, 1998 and Amendment No. 2 thereto filed May 22, 1998),
January 31, 1998, March 17, 1998 (and Amendment No. 1 thereto filed
April 3, 1998, Amendment No. 2 thereto filed June 22, 1998, Amendment
No. 3 thereto filed July 2, 1998, Amendment No. 4 thereto filed August
6, 1998, Amendment No. 5 thereto filed September 4, 1998 and Amendment
No. 6 thereto filed September 25, 1998), September 2, 1998, October 1,
1998 and October 19, 1998;
- the description of Apartment Investment and Management Company's
capital stock contained in its Registration Statement on Form 8-A
(File No. 1-13232) filed July 19, 1994, including any amendment or
reports filed for the purpose of updating such description; and
- AIMCO Properties, L.P.'s Registration Statement on Form 10, filed
September 4, 1998 and Amendment 1, filed October 16, 1998.
You may request a copy of these filings, at no cost, by writing or calling
us at the following address and telephone number:
Corporate Secretary
Apartment Investment and Management Company
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
(303) 757-8101
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of the document.
LEGAL MATTERS
Certain matters as to Maryland law and the validity of the Class A Common
Stock and the Preferred Stock will be passed upon for AIMCO by Piper & Marbury
L.L.P., Baltimore, Maryland. Certain matters as to the validity of the OP Units
will be passed upon for the AIMCO Operating Partnership by Skadden, Arps, Slate,
Meagher & Flom LLP.
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EXPERTS
The consolidated financial statements of AIMCO included in AIMCO's Annual
Report on Form 10-K/A for the year ended December 31, 1997, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. The consolidated
financial statements of the AIMCO Operating Partnership as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997
included in the AIMCO Operating Partnership's Registration Statement on Form 10
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. The
consolidated financial statements of Ambassador Apartments, Inc. as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, included in AIMCO's Current Report on Form 8-K dated March 17, 1998
(as amended on April 3, 1998) and the consolidated financial statements of
Ambassador Apartments, Inc. as of December 31, 1996 and 1995, and for each of
the two years in the period ended December 31, 1996 and the period from August
31, 1994 through December 31, 1994, and the combined financial statements of
Prime Properties (Predecessor to Ambassador Apartments, Inc.) for the period
from January 1, 1994 through August 30, 1994, included in Amendment No. 1 to
AIMCO's Current Report on Form 8-K dated December 23, 1997, filed on February 6,
1998, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon included therein and incorporated herein by reference.
The consolidated financial statements of Insignia Financial Group, Inc. as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997 included in AIMCO's Current Report on Form 8-K dated March 17,
1998 (and Amendment No. 1 thereto filed April 3, 1998), have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
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APPENDIX A
GLOSSARY
Unless the context requires otherwise, the following terms used in this
Prospectus have the respective meanings set forth below:
"1997 Housing Act" means the Multifamily Assisted Housing Reform and
Affordability Act of 1997.
"ACMs" means asbestos-containing materials.
"ADA" means the Americans with Disabilities Act of 1990.
"affordable" means, with respect to apartment units or residential
properties, that such units or properties benefit from an interest rate or
rental subsidy or are otherwise subject to governmental programs intended to
provide housing to persons with low or moderate incomes.
"Aggregate Cash Amount" means the aggregate amount that AIMCO elects to pay
in cash to the Insignia stockholders, pursuant to the Insignia Merger; provided,
however, that the Aggregate Cash Amount may not exceed the lesser of (i)
$15,000,000 and (ii) the product of (x) $36.50 less the AIMCO Index Price,
multiplied by (y) the sum of the number of shares of Insignia common stock
outstanding at the Effective Time plus the number of shares of Insignia common
stock for which outstanding Insignia Convertible Securities are exercisable,
whether or not vested, at the Effective Time.
"AIMCO" means Apartment Investment and Management Company, a Maryland
corporation.
"AIMCO Board" means the board of directors of AIMCO.
"AIMCO GP" means AIMCO-GP, Inc., a wholly owned subsidiary of AIMCO and the
general partner of the AIMCO Operating Partnership.
"AIMCO Index Price" means the average trading price of Class A Common Stock
over the 20-day period ended five trading days prior to the Effective Time, but
in no event greater than $38.00.
"AIMCO IPO" means AIMCO's initial public offering of Class A Common Stock
in July 1994.
"AIMCO Operating Partnership" means AIMCO Properties, L.P., a Delaware
limited partnership.
"AIMCO Operating Partnership Agreement" means the agreement of limited
partnership of the AIMCO Operating Partnership.
"AIMCO Properties" means the Managed Properties, Owned Properties and
Equity Properties.
"AIMCO Stock" means the Class A Common Stock and the Preferred Stock.
"Ambassador" means the Ambassador Apartments, Inc.
"Ambassador Common Stock" means the common stock, par value $.01 per share,
of Ambassador.
"Ambassador Merger" means the merger of Ambassador with and into AIMCO on
May 8, 1998.
"AMIT" means Angeles Mortgage Investment Trust.
"AMTI" means alternative minimum taxable income.
"ANHI" means AIMCO/NHP Holdings, Inc.
"Assignee" means any person to whom one or more OP Units have been
transferred.
"Bank of America" means Bank of America National Trust and Savings
Association.
"Base Rate" means quarterly cash dividends per share equal to $1.78125.
"BOA Credit Facility" means the $50 million unsecured revolving credit
facility entered into in January 1998 between the Company, Bank of America, and
BankBoston, N.A.
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"Book-Tax Difference" means, generally, the difference between the fair
market value of the contributed property at the time of contribution, and the
adjusted tax basis of such property at the time of contribution.
"Built-in Gain" means to be subject to tax at the highest regular corporate
tax rate on the excess, if any, of the fair market value over the adjusted basis
of any particular asset as of the beginning of a ten-year period.
"Bylaws" means the bylaws of AIMCO.
"California Actions" means the two complaints filed in Superior Court of
the State of California against the Company and the J.W. English Companies.
"Capital Replacement" means capitalized spending which maintains a
property.
"Charter" means AIMCO's charter.
"City of Austin" means Austin, Texas.
"CK" means CK Services, Inc.
"CK Contribution Agreement" means the Contribution Agreement, dated January
31, 1998, among AIMCO, CK and the stockholders of CK.
"Class A Common Stock" means the Class A Common Stock, par value $.01 per
share, of AIMCO.
"Class B Common Stock" means the Class B Common Stock, par value $.01 per
share, of AIMCO.
"Class B Parity Stock" means capital stock of AIMCO that ranks on parity
with Class B Preferred Stock with respect to payments of dividends or upon
liquidation, dissolution, winding up or otherwise.
"Class B Partnership Preferred Units" means the Class B Partnership
Preferred Units of the AIMCO Operating Partnership.
"Class B Preferred Ownership Limit" means a number of shares of Class B
Preferred Stock with a value equal to the excess of (i) 8.7% (or 15% in the case
of certain pension trusts described in the Code, investment companies registered
under the Investment Company Act of 1940 and Mr. Considine) of the aggregate
value of all shares of capital stock of AIMCO over (ii) the aggregate value of
all shares of capital stock of AIMCO other than Class B Preferred Stock that are
owned by such holder.
"Class B Preferred Stock" means the Class B Cumulative Convertible
Preferred Stock, par value $.01 per share, of AIMCO.
"Class C Junior Stock" means Common Stock and Class E Preferred Stock, if
any, to be issued in the Insignia Merger, and any other class or series of
capital stock of AIMCO, if, pursuant to the specific terms of such class or
series of stock, the holders of the Class C Preferred Stock are entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series.
"Class C Liquidation Preference" means the liquidation preference of $25
per share on the Class C Preferred Stock.
"Class C Parity Stock" means the Class B Preferred Stock, the Class D
Preferred Stock, the Class G Preferred Stock, the Class H Preferred Stock and
any other class or series of capital stock of AIMCO, if, pursuant to the
specific terms of such class of stock or series, the holders of such class of
stock or series and the Class C Preferred Stock shall be entitled to the receipt
of dividends and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or priority
one over the other.
"Class C Partnership Preferred Units" means the Class C Partnership
Preferred Units of the AIMCO Operating Partnership.
"Class C Preferred Ownership Limit" means a number of shares of Class C
Preferred Stock with a value equal to the excess of (i) 8.7% (or 15% in the case
of certain pension trusts described in the Code, investment
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companies registered under the Investment Company Act of 1940 and Mr. Considine)
of the aggregate value of all shares of capital stock of AIMCO over (ii) the
aggregate value of all shares of capital stock of AIMCO other than Class C
Preferred Stock that are owned by such holder.
"Class C Preferred Stock" means the Class C Cumulative Preferred Stock, par
value $.01 per share, of AIMCO.
"Class C Senior Stock" means any class or series of capital stock of AIMCO,
if, pursuant to the specific terms of such class of stock or series, the holders
of such class or series shall be entitled to the receipt of dividends or amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of the Class C Preferred Stock.
"Class D Junior Stock" means Common Stock and Class E Preferred Stock, if
any, to be issued in the Insignia Merger, and any other class or series of
capital stock of AIMCO, if, pursuant to the specific terms of such class or
series of stock, the holders of the Class D Preferred Stock are entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series.
"Class D Liquidation Preference" means the liquidation preference of $25
per share on the Class D Preferred Stock.
"Class D Parity Stock" means the Class B Preferred Stock, the Class C
Preferred Stock, the Class G Preferred Stock, the Class H Preferred Stock and
any other class or series of capital stock of AIMCO, if, pursuant to the
specific terms of such class of stock or series, the holders of such class of
stock or series and the Class D Preferred Stock shall be entitled to the receipt
of dividends and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or priority
one over the other.
"Class D Partnership Preferred Units" means the Class D Partnership
Preferred Units of the AIMCO Operating Partnership.
"Class D Preferred Ownership Limit" means a number of shares of Class D
Preferred Stock with a value equal to the excess of (i) 8.7% (or 15% in the case
of certain pension trusts described in the Code, investment companies registered
under the Investment Company Act of 1940 and Mr. Considine) of the aggregate
value of all shares of capital stock of AIMCO over (ii) the aggregate value of
all shares of capital stock of AIMCO other than Class D Preferred Stock that are
owned by such holder.
"Class D Preferred Stock" means the Class D Cumulative Preferred Stock, par
value $.01 per share, of AIMCO.
"Class D Senior Stock" means any class or series of capital stock of AIMCO,
if, pursuant to the specific terms of such class of stock or series, the holders
of such class or series shall be entitled to the receipt of dividends or amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of the Class D Preferred Stock.
"Class E Call Date" means the date specified for redemption by AIMCO in a
notice sent to holders of Class E Preferred Stock.
"Class E Conversion Date" means the date on which the Special Dividend is
paid to the holders of the Class E Preferred Stock, on which each share of Class
E Preferred Stock will be automatically converted into one share of Class A
Common Stock without any action of AIMCO or the holder of such share.
"Class E Junior Stock" means Common Stock, and any other class or series of
capital stock of AIMCO, if, pursuant to the specific terms of such class or
series of stock, the holders of the Class E Preferred Stock are entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series.
"Class E Liquidation Preference" means the liquidation preference of $1 per
share plus the Special Dividend if such dividend is unpaid on the date of the
final distribution to such holders.
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"Class E Parity Stock" means any class or series of capital stock of AIMCO,
if, pursuant to the specific terms of such class of stock or series, the holders
of such class or series of stock and the Class E Preferred Stock shall be
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up in proportion to their respective amounts
of accrued and unpaid dividends per share or liquidation preferences, without
preference or priority one over the other.
"Class E Partnership Preferred Units" means the Class E Partnership
Preferred Units of the AIMCO Operating Partnership.
"Class E Preferred Stock" means Class E Preferred Stock, par value $.01 per
share, of AIMCO.
"Class E Senior Stock" means the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock, the Class G Preferred Stock, the
Class H Preferred Stock and any other class or series of capital stock of AIMCO,
if, pursuant to the specific terms of such class of stock or series, the holders
of such class or series shall be entitled to the receipt of dividends or amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of the Class E Preferred Stock.
"Class G Junior Stock" means the Common Stock, Class E Preferred Stock if
issued in the Insignia Merger, and any other class or series of capital stock of
AIMCO, if, pursuant to the specific terms of such class or series of stock, the
holders of the Class G Preferred Stock are entitled to the receipt of dividends
or of amounts distributable upon liquidation, dissolution, and winding-up in
preference or priority to the holders of shares of such class or series.
"Class G Liquidation Preference" means the liquidation preference of $25
per share on the Class G Preferred Stock.
"Class G Parity Stock" means the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock, the Class H Preferred Stock and
any other class or series of stock of AIMCO, if, pursuant to the specific terms
of such class of stock or series, the holders of such class of stock or series
and the Class G Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other.
"Class G Partnership Preferred Units" means the Class G Partnership
Preferred Units of the AIMCO Operating Partnership.
"Class G Preferred Ownership Limit" means a number of shares of Class G
Preferred Stock with a value equal to the excess of (i) 8.7% (or 15% in the case
of certain pension trusts described in the Code, investment companies registered
under the Investment Company Act of 1940 and Mr. Considine) of the aggregate
value of all shares of capital stock of AIMCO over (ii) the aggregate value of
all shares of capital stock of AIMCO other than Class G Preferred Stock that are
owned by such holder.
"Class G Preferred Stock" means the Class G Cumulative Preferred Stock, par
value $.01 per share, of AIMCO.
"Class G Senior Stock" means any class or series of capital stock of AIMCO
which if, pursuant to the specific terms of such class of stock or series, the
holders of such class or series shall be entitled to the receipt of dividends of
amounts distributable upon liquidation, dissolution or winding up in preference
or priority to the holders of the Class G Preferred Stock.
"Class H Junior Stock" means the Common Stock, Class E Preferred Stock if
issued in the Insignia Merger, and any other class or series of capital stock of
AIMCO, if, pursuant to the specific terms of such class or series of stock, the
holders of the Class H Preferred Stock are entitled to the receipt of dividends
or of amounts distributable upon liquidation, dissolution, and winding-up in
preference or priority to the holders of shares of such class or series.
"Class H Liquidation Preference" means the liquidation preference of $25
per share on the Class H Preferred Stock.
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"Class H Parity Stock" means the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock, the Class G Preferred Stock and
any other class or series of stock of AIMCO, if, pursuant to the specific terms
of such class of stock or series, the holders of such class of stock or series
and the Class H Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other.
"Class H Partnership Preferred Units" means the Class H Partnership
Preferred Units of the AIMCO Operating Partnership.
"Class H Preferred Ownership Limit" means a number of shares of Class H
Preferred Stock with a value equal to the excess of (i) 8.7% (or 15% in the case
of certain pension trusts described in the Code, investment companies registered
under the Investment Company Act of 1940 and Mr. Considine) of the aggregate
value of all shares of capital stock of AIMCO over (ii) the aggregate value of
all shares of capital stock of AIMCO other than Class H Preferred Stock that are
owned by such holder.
"Class H Preferred Stock" means the Class H Cumulative Preferred Stock, par
value $.01 per share, of AIMCO.
"Class H Senior Stock" means any class or series of capital stock of AIMCO
which if, pursuant to the specific terms of such class of stock or series, the
holders of such class or series shall be entitled to the receipt of dividends of
amounts distributable upon liquidation, dissolution or winding up in preference
or priority to the holders of the Class H Preferred Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Security and Exchange Commission.
"Common OP Units" means Partnership Common Units of the AIMCO Operating
Partnership.
"Common Stock" means the Class A Common Stock and the Class B Common Stock.
"Common OP Unitholders" means the holders of Common OP Units.
"Company" means AIMCO, together with its consolidated subsidiaries,
including the AIMCO Operating Partnership.
"Company Predecessors" means AIMCO and Property Asset Management, L.L.C.,
and its affiliated companies and PDI Realty Enterprises, Inc.
"Complaint" means the purported class and derivative complaint filed in
California Superior Court in the County of San Mateo by persons claiming to own
limited partner interests in the Insignia Partnerships against Insignia, the
Insignia GPs, AIMCO, certain persons and entities who purportedly formerly
controlled the Insignia GPs and additional entities affiliated with, and
individuals who are officers, directors or principals of, several of the
defendants.
"Consolidated Amended Complaint" means the consolidated amended complaint
filed by plaintiffs on February 25, 1998 relating to the California Actions.
"Contributing Partner" means a person contributing property to the AIMCO
Operating Partnership in exchange for OP Units.
"control share acquisition" means the acquisition of control shares,
subject to certain exceptions.
"control shares" means voting shares of stock that, if aggregated with all
other shares of stock previously acquired by that person, would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power: (i) one-fifth or more but less than one-third,
(ii) one-third or more but less than a majority or (iii) a majority or more of
all voting power. Control shares do not include shares the acquiring person is
then entitled to vote as a result of having previously obtained stockholder
approval.
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"Convertible Securities" means warrants, options, convertible debt
securities, equity securities, contingent rights or other similar securities
upon which the Securities may be exchanged, exercised or converted.
"Counsel" means Skadden, Arps, Slate, Meagher & Flom LLP, counsel to AIMCO.
"Credit Facilities" means the WMF Credit Facility and the BOA Credit
Facility.
"Current Market Price" per share of Class A Common Stock on any date means
the average of the daily market prices of a share of Class A Common Stock for
the five consecutive trading days preceding such date. The market price for each
such day shall mean the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NYSE or, if the Class A Common Stock is not listed or admitted to
trading on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Class A Common Stock is listed or admitted to
trading or, if the Class A Common Stock is not listed or admitted to trading on
any national securities exchange, the last quoted price, or if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the Class A Common
Stock is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Class A Common Stock selected by the AIMCO Board.
"Debt Coverage Ratio" means the ratio of EBITDA (less a provision of
approximately $300 per owned apartment) to debt.
"Delaware LP Act" means the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time, or any successor to such statute.
"Distribution" means the transfer of the remaining business of Insignia to
Holdings and the distribution of all of the capital stock of Holdings to
Insignia's stockholders prior to the Insignia Merger.
"Dividend Payment Date" means any date on which cash dividends are paid on
the Class A Common Stock.
"DOJ" means the U.S. Department of Justice.
"domestically controlled REIT" means a REIT in which, at all times during a
specified testing period, less than 50% in value of its shares is held directly
or indirectly by Non-U.S. Holders.
"Effective Time" means the effective time of the Insignia Merger.
"Eligible Class B Shares" means the number of shares of Class B Common
Stock outstanding as of the Year-end Test Date which become eligible for
automatic conversion into an equal number of shares of Class A Common Stock
(subject to the Ownership Limit).
"English Acquisition" means the Company's acquisition in November 1996 of
certain partnership interests, real estate and related assets owned by the J.W.
English Companies.
"English Partnerships" means 31 limited partnerships, interests in which
were purchased by the Company from the J.W. English Companies pursuant to the
English Acquisition.
"English Tender Offers" means the separate tender offers made by the AIMCO
Operating Partnership to the limited partners of 25 of the English Partnerships.
"EPA" means the U.S. Environmental Protection Agency.
"Equity Properties" means the apartment properties in which AIMCO holds an
equity interest.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Exempt Organizations" means tax-exempt entities, including qualified
employee pension and profit sharing trusts and individual retirement accounts.
"Federal Action" means the class action lawsuit filed in November 1996 by
purported limited partners of certain of the Tender Offer English Partnerships
against the Company and J.W. English in the U.S. District Court for the Northern
District of California.
"FFO" means funds from operations.
"FFO Per Share" or "Funds from Operating Per Share" means, for any period,
(i) net income (loss), computed in accordance with generally accepted accounting
principles, excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures, less any preferred stock
dividend payments, divided by (ii) the sum of (a) the number of shares of the
Class A Common Stock outstanding on the last day of such period (excluding any
shares of the Class A Common Stock into which shares of the Class B Common Stock
shall have been converted as a result of the conversion of shares of the Class B
Common Stock on the last day of such period) and (b) the number of shares of the
Class A Common Stock issuable to acquire units of limited partnership that (x)
may be tendered for redemption in any limited partnership in which AIMCO serves
as general partner and (y) are outstanding on the last day of such period.
"FHAA" means the Fair Housing Amendments Act of 1988.
"FIRPTA" means Foreign Investment in Real Property Tax Act of 1980.
"FNMA" means the Federal National Mortgage Association.
"GAAP" means generally accepted accounting principles.
"GMAC" means General Motors Acceptance Corporation.
"GMAC Loans" means the 93 loans made by GMAC as of June 30, 1998 with an
aggregate outstanding principal balance of $420.1 million to property owning
partnerships of the Company, each of which is secured by the Owned Property of
such partnership.
"HAP Contracts" means Housing Assistance Payment Contracts.
"High Performance Units" means the OP Units designated as Class I High
Performance Units.
"Holdings" means Insignia/ESG Holdings, Inc.
"HUD" means the U.S. Department of Housing and Urban Development.
"Indemnitee" means the AIMCO Operating Partnership's directors and
officers.
"Insignia" means the Insignia Financial Group, Inc.
"Insignia Convertible Securities" means any and all securities issued by
Insignia or any subsidiary of Insignia (excluding stock options issued under the
Insignia 1992 Stock Incentive Plan, as amended, and the Insignia 1995
Non-Employee Director Stock Option Plan) which are exercisable, convertible or
exchangeable for or into shares of Insignia common stock, but specifically
excluding the Convertible Preferred Securities.
"Insignia GPs" means the general partners of the Insignia Partnerships.
"Insignia Merger" means the merger of Insignia with and into AIMCO.
"Insignia Merger Agreement" means the merger agreement between AIMCO, the
AIMCO Operating Partnership, Insignia and Holdings pursuant to which Insignia
will be merged with and into AIMCO.
"Insignia Partnerships" means the limited partnerships whose general
partners are affiliates of Insignia.
"Insignia Reorganization" means the transfer of certain assets and
liabilities of Insignia to the Unconsolidated Subsidiaries.
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"Interested Stockholder" means any person who beneficially owns 10% or more
of the voting power of the corporation's shares or an affiliate of the
corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then-outstanding voting stock of the corporation.
"IPT" means Insignia Properties Trust, a Maryland REIT, which is a majority
owned subsidiary of Insignia.
"IPT Shares" means the shares of beneficial interest of IPT, par value $.01
per share.
"IRS" means the Internal Revenue Service.
"J.W. English Companies" means J.W. English, a Houston, Texas-based real
estate syndicator and developer, and certain affiliated entities.
"LDP" means a limited denial of participation by any HUD office.
"Liquidating Event" means any of the following: (i) December 31, 2093; (ii)
an event of withdrawal, as defined in the Delaware LP Act (including, without
limitation, bankruptcy), of the sole AIMCO GP unless, within ninety (90) days
after the withdrawal, a majority in interest (as such phrase is used in Section
17-801(3) of the Delaware LP Act) of the remaining OP Unitholders agree in
writing, in their sole and absolute discretion, to continue the business of the
AIMCO Operating Partnership and to the appointment, effective as of the date of
withdrawal, of a successor AIMCO GP; (iii) an election to dissolve the AIMCO
Operating Partnership made by the AIMCO GP in its sole and absolute discretion,
with or without the consent of the OP Unitholders; (iv) entry of a decree of
judicial dissolution of the AIMCO Operating Partnership pursuant to the
provisions of the Delaware LP Act; (v) the occurrence of a Terminating Capital
Transaction; or (vi) the Redemption (or acquisition by AIMCO, the AIMCO GP
and/or the Special Limited Partner) of all Common OP Units other than Common OP
Units held by the AIMCO GP or the Special Limited Partner.
"Majority in Interest" means OP Unitholders (other than (i) the Special
Limited Partner and (ii) any OP Unitholder fifty percent (50%) or more of whose
equity is owned, directly or indirectly, by (a) the AIMCO GP or (b) any REIT as
to which the AIMCO GP is a "qualified REIT subsidiary" (within the meaning of
Code Section 856(i)(2))) holding more than fifty percent (50%) of the
outstanding Common OP Units held by all OP Unitholders (other than (i) the
Special Limited Partner and (ii) any OP Unitholder fifty percent (50%) or more
of whose equity is owned, directly or indirectly, by (a) the AIMCO GP or (b) any
REIT as to which the AIMCO GP is a "qualified REIT subsidiary" (within the
meaning of Code Section 856(i)(2))).
"Managed Properties" means the apartment properties managed by AIMCO for
third party owners and affiliates.
"Management Subsidiaries" means PAMS LP and the other subsidiaries of the
Company that manage the Managed Properties.
"March Hedge" means the interest rate hedging agreement entered into in
March 1997 between the Company and an investment banking company in anticipation
of certain indebtedness.
"Measurement Period" means the January 1, 1998 to the Valuation Date.
"MGCL" means the Maryland General Corporation Law.
"Minimum Return" means a 30% cumulative Total Return over three years.
"NAREIT" means the National Association of Real Estate Investment Trusts.
"NHP" means NHP Incorporated.
"NHP Properties" means the 534 multifamily apartment properties containing
87,689 apartment units, a captive insurance subsidiary and certain related
assets.
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"NHP Real Estate Companies" means a group of companies previously owned by
NHP that hold interests in the NHP Properties.
"NHP Real Estate Reorganization" means the reorganization of the Company's
interests in the NHP Real Estate Companies.
"Non-U.S. Holder" means any person other than (i) a citizen or resident of
the United States, (ii) a corporation or partnership created or organized in the
United States or under the laws of the United States or of any state thereof or
the District of Columbia, (iii) an estate whose income is includible in gross
income for U.S. federal income tax purposes regardless of its source or (iv) a
trust if a United States court is able to exercise primary supervision over the
administration of such trust and one or more United States fiduciaries have the
authority to control all substantial decisions of such trust.
"NYSE" means the New York Stock Exchange.
"OP Merger" means the merger of the Ambassador Operating Partnership with
and into the AIMCO Operating Partnership.
"OP Unitholder" means a holder of OP Units.
"OP Units" means Preferred OP Units and the Common OP Units.
"Owned Properties" means the apartment properties owned or controlled by
AIMCO.
"Ownership Limit" means the limit by the AIMCO Charter of direct or
constructive ownership of shares of Class A Common Stock representing more than
8.7% (or 15% in the case of certain pension trusts, registered investment
companies and Mr. Considine) of the combined total of outstanding shares of
AIMCO's Class A Common Stock or Class B Common Stock by any person.
"Partner" means the AIMCO GP or an OP Unitholder, and "Partners" means the
AIMCO GP and the OP Unitholders.
"Partnership Tax Items" means partnership tax items including partnership
income, gains, losses, deductions, and credits.
"Preferred OP Units" means Partnership Preferred Units of the AIMCO
Operating Partnership.
"Preferred Share Investor" means the institutional investor to whom AIMCO
issued 750,000 shares of Class B Preferred Stock in a private transaction.
"Preferred Share Purchase Agreement" means the agreement pursuant to which
AIMCO issued the Class B Preferred Stock.
"Preferred Stock" means the preferred stock of AIMCO, par value $.01 per
share.
"Prospectus" means this prospectus, as it may be further supplemented or
amended from time to time.
"Prospectus Supplement" means a prospectus supplement accompanying the
Prospectus.
"PTP Regulations" means the Treasury Regulations generally effective for
taxable years beginning after December 31, 1995.
"publicly traded partnership" means a partnership classified as a publicly
traded partnership for federal income tax purposes.
"qualifying income" means, in general, income which includes interest,
dividends, real property rents (as defined by Section 856 of the Code) and gain
from the sale or disposition of real property.
"Redemption" means to redeem all or a portion of the Common OP Units held
by a Common OP Unitholder and certain Assignees in exchange for a cash amount
based on the value of shares of Class A Common Stock.
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"Registration Statement" means the registration statement on Form S-4 of
which the Prospectus forms a part, together with all amendments and exhibits,
filed by AIMCO and the AIMCO Operating Partnership with the Commission.
"REIT" means a real estate investment trust.
"REIT Requirements" means the requirements for qualifying a REIT under the
Code.
"Schedule K-1" means the report which the AIMCO Operating Partnership
furnishes to each OP Unitholder that sets forth his allocable share of income,
gains, losses and deductions.
"Section 751 Assets" has the meaning given to such term in the Code.
"Section 8" means Section 8 of the United States Housing Act of 1937.
"Securities" means the Preferred Stock, the Class A Common Stock and the OP
Units.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholders" means persons who may receive from AIMCO or the AIMCO
Operating Partnership Securities covered by the Registration Statement in
acquisitions and who may be entitled to offer such Securities under
circumstances requiring the use of a Prospectus.
"September Hedge" means the interest rate agreement entered into in
September 1997 between the Company and an investment banking company.
"Special Dividend" means the special dividend of $50 million in the
aggregate of which holders of Class E Preferred Stock will be entitled to
receive a pro rata share.
"Special Limited Partner" means AIMCO-LP, Inc., a limited partner in the
AIMCO Operating Partnership.
"Subsidiary Partnerships" means other limited partnerships and limited
liability companies in which AIMCO has a controlling interest.
"Tax Matters Partner" means AIMCO GP, which is authorized, but not
required, to take certain actions on behalf of the AIMCO Operating Partnership
with respect to tax matters.
"Tender Offer English Partnerships" means the 25 English Partnerships that
received English Tender Offers.
"Terminating Capital Transaction" means the sale or other disposition of
all or substantially all of the assets of the AIMCO Operating Partnership or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the AIMCO Operating
Partnership.
"TMT" means tentative minimum tax.
"TNRCC" means the Texas Natural Resources Conservation Commission.
"Total Return" means, for any security and for any period, the cumulative
total return for such security over such period, as measured by (i) the sum of
(a) the cumulative amount of dividends paid in respect of such security for such
period (assuming that all cash dividends are reinvested in such security as of
the payment date for such dividend based on the security price on the dividend
payment date), and (b) an amount equal to (x) the security price at the end of
such period, minus (y) the security price at the beginning of such period,
divided by (ii) the security price at the beginning of the measurement period;
provided, however, that if the foregoing calculation results in a negative
number, the "Total Return" shall be equal to zero.
"Treasury Regulations" means the Treasury regulations promulgated under the
Code.
"UBTI" means unrelated business taxable income.
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"UBTI Percentage" means the gross income derived by AIMCO from an unrelated
trade or business (determined as if AIMCO were a pension trust) divided by the
gross income of AIMCO for the year in which the dividends are paid.
"Unconsolidated Partnership" means a limited partnership in which the AIMCO
Operating Partnership will hold a 99% limited partnership interest and certain
directors and officers of AIMCO will, directly or indirectly, hold a 1% general
partner interest.
"Unconsolidated Subsidiaries" means the unconsolidated subsidiaries of
AIMCO, which from time to time, the Company has organized in order to satisfy
certain requirements for AIMCO's continued qualification as a REIT.
"Underlying Partnership" means another partnership other than the AIMCO
Operating Partnership.
"USRPI" means a United States Real Property Interest.
"USRPI Capital Gains" means a distribution made by AIMCO to a Non-U.S.
Holder, to the extent attributable to gains from dispositions of USRPIs such as
the properties beneficially owned by AIMCO.
"Valuation Date" means the date that is the earlier of (i) January 1, 2001,
or (ii) the date on which a change of control occurs.
"voting stock" means the stock entitled to be cast generally in the
election of directors.
"Washington Mortgage" means Washington Mortgage Financial Group, Ltd.
"WMF Credit Facility" means the $50 million secured revolving credit
facility entered into in February 1998 between the Company and Washington
Mortgage.
"Year-End Test Date" means December 31 of each of the years 1994 through
1998.
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APPENDIX B
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THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
AIMCO PROPERTIES, L.P.
A DELAWARE LIMITED PARTNERSHIP
------------------------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF
COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN FORM AND SUBSTANCE SATISFACTORY TO
THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER
DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
DATED AS OF JULY 29, 1994
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 DEFINED TERMS............................................... B-1
ARTICLE 2 ORGANIZATIONAL MATTERS...................................... B-14
Section 2.1 Organization.................................. B-14
Section 2.2 Name.......................................... B-14
Section 2.3 Registered Office and Agent; Principal
Office...................................................... B-14
Section 2.4 Power of Attorney............................. B-14
Section 2.5 Term.......................................... B-15
ARTICLE 3 PURPOSE..................................................... B-15
Section 3.1 Purpose and Business.......................... B-15
Section 3.2 Powers........................................ B-16
Section 3.3 Partnership Only for Purposes Specified....... B-16
Section 3.4 Representations and Warranties by the
Parties..................................................... B-16
ARTICLE 4 CAPITAL CONTRIBUTIONS....................................... B-18
Section 4.1 Capital Contributions of the Partners......... B-18
Section 4.2 Issuances of Additional Partnership
Interests................................................... B-18
Section 4.3 Additional Funds.............................. B-19
Section 4.4 Stock Option Plans............................ B-20
Section 4.5 No Interest; No Return........................ B-21
Section 4.6 Conversion of Junior Shares................... B-21
ARTICLE 5 DISTRIBUTIONS............................................... B-21
Section 5.1 Requirement and Characterization of
Distributions............................................... B-21
Section 5.2 Distributions in Kind......................... B-21
Section 5.3 Amounts Withheld.............................. B-22
Section 5.4 Distributions Upon Liquidation................ B-22
Section 5.5 Restricted Distributions...................... B-22
ARTICLE 6 ALLOCATIONS................................................. B-22
Section 6.1 Timing and Amount of Allocations of Net Income
and Net Loss.................................. B-22
Section 6.2 General Allocations........................... B-22
Section 6.3 Additional Allocation Provisions.............. B-22
Section 6.4 Tax Allocations............................... B-24
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS....................... B-24
Section 7.1 Management.................................... B-24
Section 7.2 Certificate of Limited Partnership............ B-27
Section 7.3 Restrictions on General Partner's Authority... B-27
Section 7.4 Reimbursement of the General Partner.......... B-29
Section 7.5 Outside Activities of the Previous General
Partner and the General Partner............................. B-29
</TABLE>
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<TABLE>
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<S> <C> <C>
Section 7.6 Contracts with Affiliates..................... B-30
Section 7.7 Indemnification............................... B-30
Section 7.8 Liability of the General Partner.............. B-32
Section 7.9 Other Matters Concerning the General
Partner..................................................... B-32
Section 7.10 Title to Partnership Assets................... B-33
Section 7.11 Reliance by Third Parties..................... B-33
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.................. B-34
Section 8.1 Limitation of Liability....................... B-34
Section 8.2 Management of Business........................ B-34
Section 8.3 Outside Activities of Limited Partners........ B-34
Section 8.4 Return of Capital............................. B-34
Section 8.5 Rights of Limited Partners Relating to the
Partnership................................................. B-34
Section 8.6 Redemption Rights of Qualifying Parties....... B-35
Section 8.7 Partnership Right to Call Limited Partner
Interests................................................... B-38
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS...................... B-38
Section 9.1 Records and Accounting........................ B-38
Section 9.2 Fiscal Year................................... B-39
Section 9.3 Reports....................................... B-39
ARTICLE 10 TAX MATTERS................................................. B-39
Section 10.1 Preparation of Tax Returns.................... B-39
Section 10.2 Tax Elections................................. B-39
Section 10.3 Tax Matters Partner........................... B-39
Section 10.4 Withholding................................... B-40
ARTICLE 11 TRANSFERS AND WITHDRAWALS................................... B-41
Section 11.1 Transfer...................................... B-41
Section 11.2 Transfer of General Partner's Partnership
Interest.................................................... B-41
Section 11.3 Limited Partners' Rights to Transfer.......... B-42
Section 11.4 Substituted Limited Partners.................. B-44
Section 11.5 Assignees..................................... B-44
Section 11.6 General Provisions............................ B-44
ARTICLE 12 ADMISSION OF PARTNERS....................................... B-46
Section 12.1 Admission of Successor General Partner........ B-46
Section 12.2 Admission of Additional Limited Partners...... B-46
Section 12.3 Amendment of Agreement and Certificate of
Limited Partnership........................... B-46
Section 12.4 Admission of Initial Limited Partners......... B-46
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION.................... B-47
Section 13.1 Dissolution................................... B-47
Section 13.2 Winding Up.................................... B-47
</TABLE>
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<TABLE>
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<S> <C> <C>
Section 13.3 Deemed Distribution and Recontribution........ B-48
Section 13.4 Rights of Limited Partners.................... B-48
Section 13.5 Notice of Dissolution......................... B-49
Section 13.6 Cancellation of Certificate of Limited
Partnership................................................. B-49
Section 13.7 Reasonable Time for Winding-Up................ B-49
ARTICLE 14 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS; AMENDMENTS;
MEETINGS.................................................... B-49
Section 14.1 Procedures for Actions and Consents of
Partners.................................................... B-49
Section 14.2 Amendments.................................... B-49
Section 14.3 Meetings of the Partners...................... B-49
ARTICLE 15 GENERAL PROVISIONS.......................................... B-50
Section 15.1 Addresses and Notice.......................... B-50
Section 15.2 Titles and Captions........................... B-50
Section 15.3 Pronouns and Plurals.......................... B-50
Section 15.4 Further Action................................ B-50
Section 15.5 Binding Effect................................ B-50
Section 15.6 Waiver........................................ B-50
Section 15.7 Counterparts.................................. B-51
Section 15.8 Applicable Law................................ B-51
Section 15.9 Entire Agreement.............................. B-51
Section 15.10 Invalidity of Provisions...................... B-51
Section 15.11 Limitation to Preserve REIT Status............ B-51
Section 15.12 No Partition.................................. B-52
Section 15.13 No Third-Party Rights Created Hereby.......... B-52
</TABLE>
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<TABLE>
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<S> <C> <C>
EXHIBIT A PARTNERS AND PARTNERSHIP UNITS.............................. A-1
EXHIBIT B EXAMPLES REGARDING ADJUSTMENT FACTOR........................ B-1
EXHIBIT C LIST OF DESIGNATED PARTIES.................................. C-1
EXHIBIT D INTENTIONALLY OMITTED....................................... D-1
EXHIBIT E NOTICE OF REDEMPTION........................................ E-1
EXHIBIT F FORM OF UNIT CERTIFICATE.................................... F-1
EXHIBIT G PARTNERSHIP UNIT DESIGNATION OF THE CLASS B PARTNERSHIP
PREFERRED UNITS............................................. G-1
EXHIBIT H PARTNERSHIP UNIT DESIGNATION OF THE CLASS C PARTNERSHIP
PREFERRED UNITS............................................. H-1
EXHIBIT I PARTNERSHIP UNIT DESIGNATION OF THE CLASS D PARTNERSHIP
PREFERRED UNITS............................................. I-1
EXHIBIT J PARTNERSHIP UNIT DESIGNATION OF THE CLASS E PARTNERSHIP
PREFERRED UNITS............................................. J-1
EXHIBIT K PARTNERSHIP UNIT DESIGNATION OF THE CLASS I HIGH PERFORMANCE
PARTNERSHIP UNITS........................................... K-1
EXHIBIT L PARTNERSHIP UNIT DESIGNATION OF THE CLASS G PARTNERSHIP
PREFERRED UNITS............................................. L-1
EXHIBIT M PARTNERSHIP UNIT DESIGNATION OF THE CLASS H PARTNERSHIP
PREFERRED UNITS............................................. M-1
</TABLE>
NONE OF THE ABOVE EXHIBITS ARE INCLUDED IN THIS PROSPECTUS.
THEY ARE AVAILABLE UPON REQUEST OF AIMCO PROPERTIES, L.P.
iv
<PAGE> 109
THIRD AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P.
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO
PROPERTIES, L.P., dated as of July 29, 1994, and amended and restated as of
October 1, 1998, is entered into by and among Apartment Investment and
Management Company, a Maryland corporation (the "Previous General Partner"),
AIMCO-GP, Inc., a Delaware corporation (the "General Partner"), AIMCO-LP, Inc.,
a Delaware corporation (the "Special Limited Partner"), and the other Limited
Partners (as defined below).
WHEREAS, the General Partner has submitted, and the Limited Partners have
approved, an amendment and restatement of the Agreement of Limited Partnership
of AIMCO Properties, L.P. on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"Actions" has the meaning set forth in Section 7.7 hereof.
"Additional Funds" has the meaning set forth in Section 4.3.A hereof.
"Additional Limited Partner" means a Person who is admitted to the
Partnership as a Limited Partner pursuant to Section 4.2 and Section 12.2 hereof
and who is shown as such on the books and records of the Partnership.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(i) decrease such deficit by any amounts that such Partner is
obligated to restore pursuant to this Agreement or by operation of law upon
liquidation of such Partner's Partnership Interest or is deemed to be
obligated to restore pursuant to the penultimate sentence of each of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) increase such deficit by the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account Deficit" is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjustment Factor" means 1.0; provided, however, that in the event that:
(i) the Previous General Partner (a) declares or pays a dividend on
its outstanding REIT Shares in REIT Shares or makes a distribution to all
holders of its outstanding REIT Shares in REIT Shares, (b) splits or
subdivides its outstanding REIT Shares or (c) effects a reverse stock split
or otherwise combines its outstanding REIT Shares into a smaller number of
REIT Shares, the Adjustment Factor shall be adjusted by multiplying the
Adjustment Factor previously in effect by a fraction, (i) the numerator of
which shall be the number of REIT Shares issued and outstanding on the
record date for
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<PAGE> 110
such dividend, distribution, split, subdivision, reverse split or
combination (assuming for such purposes that such dividend, distribution,
split, subdivision, reverse split or combination has occurred as of such
time) and (ii) the denominator of which shall be the actual number of REIT
Shares (determined without the above assumption) issued and outstanding on
the record date for such dividend, distribution, split, subdivision,
reverse split or combination;
(ii) the Previous General Partner distributes any rights, options or
warrants to all holders of its REIT Shares to subscribe for or to purchase
or to otherwise acquire REIT Shares (or other securities or rights
convertible into, exchangeable for or exercisable for REIT Shares) at a
price per share less than the Value of a REIT Share on the record date for
such distribution (each a "Distributed Right"), then the Adjustment Factor
shall be adjusted by multiplying the Adjustment Factor previously in effect
by a fraction (a) the numerator of which shall be the number of REIT Shares
issued and outstanding on the record date plus the maximum number of REIT
Shares purchasable under such Distributed Rights and (b) the denominator of
which shall be the number of REIT Shares issued and outstanding on the
record date plus a fraction (1) the numerator of which is the maximum
number of REIT Shares purchasable under such Distributed Rights times the
minimum purchase price per REIT Share under such Distributed Rights and (2)
the denominator of which is the Value of a REIT Share as of the record
date; provided, however, that, if any such Distributed Rights expire or
become no longer exercisable, then the Adjustment Factor shall be adjusted,
effective retroactive to the date of distribution of the Distributed
Rights, to reflect a reduced maximum number of REIT Shares or any change in
the minimum purchase price for the purposes of the above fraction; and
(iii) the Previous General Partner shall, by dividend or otherwise,
distribute to all holders of its REIT Shares evidences of its indebtedness
or assets (including securities, but excluding any dividend or distribution
referred to in subsection (i) above), which evidences of indebtedness or
assets relate to assets not received by the Previous General Partner, the
General Partner and/or the Special Limited Partner pursuant to a pro rata
distribution by the Partnership, then the Adjustment Factor shall be
adjusted to equal the amount determined by multiplying the Adjustment
Factor in effect immediately prior to the close of business on the date
fixed for determination of shareholders entitled to receive such
distribution by a fraction (i) the numerator shall be such Value of a REIT
Share on the date fixed for such determination and (ii) the denominator
shall be the Value of a REIT Share on the dates fixed for such
determination less the then fair market value (as determined by the General
Partner, whose determination shall be conclusive) of the portion of the
evidences of indebtedness or assets so distributed applicable to one REIT
Share.
Any adjustments to the Adjustment Factor shall become effective immediately
after the effective date of such event, retroactive to the record date, if any,
for such event, provided, however, that any Limited Partner may waive, by
written notice to the General Partner, the effect of any adjustment to the
Adjustment Factor applicable to the Partnership Common Units held by such
Limited Partner, and, thereafter, such adjustment will not be effective as to
such Partnership Common Units. For illustrative purposes, examples of
adjustments to the Adjustment Factor are set forth on Exhibit B attached hereto.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition, "control" when used with respect to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Third Amended and Restated Agreement of Limited
Partnership of AIMCO Properties, L.P., as it may be amended, supplemented or
restated from time to time.
"Applicable Percentage" has the meaning set forth in Section 8.6.B hereof.
"Appraisal" means, with respect to any assets, the written opinion of an
independent third party experienced in the valuation of similar assets, selected
by the General Partner in good faith. Such opinion may
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be in the form of an opinion by such independent third party that the value for
such property or asset as set by the General Partner is fair, from a financial
point of view, to the Partnership.
"Assignee" means a Person to whom one or more Partnership Common Units have
been Transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5 hereof.
"Available Cash" means, with respect to any period for which such
calculation is being made,
(i) the sum, without duplication, of:
(1) the Partnership's Net Income or Net Loss (as the case may be)
for such period,
(2) Depreciation and all other noncash charges to the extent
deducted in determining Net Income or Net Loss for such period,
(3) the amount of any reduction in reserves of the Partnership
referred to in clause (ii)(6) below (including, without limitation,
reductions resulting because the General Partner determines such amounts
are no longer necessary),
(4) the excess, if any, of the net cash proceeds from the sale,
exchange, disposition, financing or refinancing of Partnership property
for such period over the gain (or loss, as the case may be) recognized
from such sale, exchange, disposition, financing or refinancing during
such period (excluding Terminating Capital Transactions), and
(5) all other cash received (including amounts previously accrued
as Net Income and amounts of deferred income) or any net amounts
borrowed by the Partnership for such period that was not included in
determining Net Income or Net Loss for such period;
(ii) less the sum, without duplication, of:
(1) all principal debt payments made during such period by the
Partnership,
(2) capital expenditures made by the Partnership during such
period,
(3) investments in any entity (including loans made thereto) to the
extent that such investments are not otherwise described in clause
(ii)(1) or clause (ii)(2) above,
(4) all other expenditures and payments not deducted in determining
Net Income or Net Loss for such period (including amounts paid in
respect of expenses previously accrued),
(5) any amount included in determining Net Income or Net Loss for
such period that was not received by the Partnership during such period,
(6) the amount of any increase in reserves (including, without
limitation, working capital reserves) established during such period
that the General Partner determines are necessary or appropriate in its
sole and absolute discretion, and
(7) any amount distributed or paid in redemption of any Limited
Partner Interest or Partnership Units including, without limitation, any
Cash Amount paid.
Notwithstanding the foregoing, Available Cash shall not include (a) any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Partnership or (b) any Capital Contributions,
whenever received.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Denver, Colorado, Los Angeles, California or New York,
New York are authorized or required by law to close.
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"Capital Account" means, with respect to any Partner, the Capital Account
maintained by the General Partner for such Partner on the Partnership's books
and records in accordance with the following provisions:
(a) To each Partner's Capital Account, there shall be added such
Partner's Capital Contributions, such Partner's distributive share of Net
Income and any items in the nature of income or gain that are specially
allocated pursuant to Section 6.3 hereof, and the principal amount of any
Partnership liabilities assumed by such Partner or that are secured by any
property distributed to such Partner.
(b) From each Partner's Capital Account, there shall be subtracted the
amount of cash and the Gross Asset Value of any property distributed to
such Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Net Losses and any items in the nature of expenses or
losses that are specially allocated pursuant to Section 6.3 hereof, and the
principal amount of any liabilities of such Partner assumed by the
Partnership or that are secured by any property contributed by such Partner
to the Partnership.
(c) In the event any interest in the Partnership is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent that it relates to
the Transferred interest.
(d) In determining the principal amount of any liability for purposes
of subsections (a) and (b) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
(e) The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Sections
1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner
consistent with such Regulations. If the General Partner shall determine
that it is prudent to modify the manner in which the Capital Accounts are
maintained in order to comply with such Regulations, the General Partner
may make such modification provided that such modification will not have a
material effect on the amounts distributable to any Partner without such
Partner's Consent. The General Partner also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Partners and the amount of Partnership capital reflected on
the Partnership's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any
appropriate modifications in the event that unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any Contributed Property that such
Partner contributes to the Partnership pursuant to Section 4.1, 4.2 or 4.3
hereof or is deemed to contribute pursuant to Section 4.4 hereof.
"Cash Amount" means the lesser of (a) an amount of cash equal to the
product of (i) the Value of a REIT Share and (ii) the REIT Shares Amount
determined as of the applicable Valuation Date or (b) in the case of a
Declination followed by a Public Offering Funding, the Public Offering Funding
Amount.
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Secretary of State of the State of
Delaware, as amended from time to time in accordance with the terms hereof and
the Act.
"Charter" means the Articles of Amendment and Restatement of the Previous
General Partner filed with the Maryland State Department of Assessments and
Taxation on July 19, 1994, as amended, supplemented or restated from time to
time.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time or any successor statute thereto, as interpreted by the
applicable Regulations thereunder. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any corresponding
provision of future law.
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<PAGE> 113
"Company Employee" has the meaning ascribed thereto in the Previous General
Partner's 1994 Stock Option Plan.
"Consent" means the consent to, approval of, or vote in favor of a proposed
action by a Partner given in accordance with Article 14 hereof.
"Consent of the Limited Partners" means the Consent of a Majority in
Interest of the Limited Partners, which Consent shall be obtained prior to the
taking of any action for which it is required by this Agreement and, except as
otherwise provided in this Agreement, may be given or withheld by a Majority in
Interest of the Limited Partners, in their reasonable discretion.
"Contributed Property" means each Property or other asset, in such form as
may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Partnership (or deemed contributed to the Partnership on
termination and reconstitution thereof pursuant to Code Section 708).
"Controlled Entity" means, as to any Limited Partner, (a) any corporation
more than fifty percent (50%) of the outstanding voting stock of which is owned
by such Limited Partner or such Limited Partner's Family Members, (b) any trust,
whether or not revocable, of which such Limited Partner or such Limited
Partner's Family Members are the sole beneficiaries, (c) any partnership of
which such Limited Partner is the managing partner and in which such Limited
Partner or such Limited Partner's Family Members hold partnership interests
representing at least twenty-five percent (25%) of such partnership's capital
and profits and (d) any limited liability company of which such Limited Partner
is the manager and in which such Limited Partner or such Limited Partner's
Family Members hold membership interests representing at least twenty-five
percent (25%) of such limited liability company's capital and profits.
"Controlling Person" means any Person, whatever his or her title, who
performs executive or senior management functions for the General Partner or its
Affiliates similar to those of directors, executive management and senior
management, or any Person who either holds a two percent (2%) or more equity
interest in the General Partner or its Affiliates, or has the power to direct or
cause the direction of the General Partner or its Affiliates, whether through
the ownership of voting securities, by contract or otherwise, or, in the absence
of a specific role or title, any Person having the power to direct or cause the
direction of the management-level employees and policies of the General Partner
or its Affiliates. It is not intended that every Person who carries a title such
as vice president, senior vice president, secretary or treasurer be included in
the definition of "Controlling Person."
"Cut-Off Date" means the fifth (5th) Business Day after the General
Partner's receipt of a Notice of Redemption.
"Debt" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
that, in accordance with generally accepted accounting principles, should be
capitalized.
"Declination" has the meaning set forth in Section 8.6.D hereof.
"Depreciation" means, for each Fiscal Year or other applicable period, an
amount equal to the federal income tax depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
period, Depreciation shall be in an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction
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for such year or period is zero, Depreciation shall be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
"Designated Parties" means the Persons designated on Exhibit C attached
hereto. The General Partner may, in its sole and absolute discretion, amend
Exhibit C to add Persons to be designated as Designated Parties.
"Distributed Right" has the meaning set forth in the definition of
"Adjustment Factor."
"Effective Date" means July 29, 1994.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Family Members" means, as to a Person that is an individual, such Person's
spouse, ancestors, descendants (whether by blood or by adoption), brothers,
sisters and inter vivos or testamentary trusts of which only such Person and his
spouse, ancestors, descendants (whether by blood or by adoption), brothers and
sisters are beneficiaries.
"Fiscal Year" means the fiscal year of the Partnership, which shall be the
calendar year.
"Funding Debt" means any Debt incurred by or on behalf of the Previous
General Partner, the General Partner or the Special Limited Partner for the
purpose of providing funds to the Partnership.
"General Partner" means AIMCO-GP, Inc., a Delaware corporation, and its
successors and assigns, as the general partner of the Partnership in their
capacities as general partner of the Partnership.
"General Partner Interest" means the Partnership Interest held by the
General Partner, which Partnership Interest is an interest as a general partner
under the Act. A General Partner Interest may be expressed as a number of
Partnership Common Units, Partnership Preferred Units or any other Partnership
Units.
"General Partner Loan" has the meaning set forth in Section 4.3.D hereof.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market values of such
assets as determined by the General Partner and agreed to by the
contributing Partner. In any case in which the General Partner and the
contributing Partner are unable to agree as to the gross fair market value
of any contributed asset or assets, such gross fair market value shall be
determined by Appraisal.
(b) The Gross Asset Values of all Partnership assets immediately prior
to the occurrence of any event described in clause (i), clause (ii), clause
(iii), clause (iv) or clause (v) hereof shall be adjusted to equal their
respective gross fair market values, as determined by the General Partner
using such reasonable method of valuation as it may adopt, as of the
following times:
(i) the acquisition of an additional interest in the Partnership
(other than in connection with the execution of this Agreement but
including, without limitation, acquisitions pursuant to Section 4.2
hereof or contributions or deemed contributions by the General Partner
pursuant to Section 4.2 hereof) by a new or existing Partner in exchange
for more than a de minimis Capital Contribution, if the General Partner
reasonably determines that such adjustment is necessary or appropriate
to reflect the relative economic interests of the Partners in the
Partnership;
(ii) the distribution by the Partnership to a Partner of more than
a de minimis amount of Partnership property as consideration for an
interest in the Partnership, if the General Partner reasonably
determines that such adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership;
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(iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g);
(iv) upon the admission of a successor General Partner pursuant to
Section 12.1 hereof; and
(v) at such other times as the General Partner shall reasonably
determine necessary or advisable in order to comply with Regulations
Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed to a
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the General Partner
provided that, if the distributee is the General Partner or if the
distributee and the General Partner cannot agree on such a determination,
such gross fair market value shall be determined by Appraisal.
(d) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant
to this subsection (d) to the extent that the General Partner reasonably
determines that an adjustment pursuant to subsection (b) above is necessary
or appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this subsection (d).
(e) If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset for
purposes of computing Net Income and Net Losses.
"Holder" means either (a) a Partner or (b) an Assignee, owning a
Partnership Unit, that is treated as a member of the Partnership for federal
income tax purposes.
"Incapacity" or "Incapacitated" means, (i) as to any Partner who is an
individual, death, total physical disability or entry by a court of competent
jurisdiction adjudicating such Partner incompetent to manage his or her person
or his or her estate; (ii) as to any Partner that is a corporation or limited
liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or the revocation of its charter; (iii) as to
any Partner that is a partnership, the dissolution and commencement of winding
up of the partnership; (iv) as to any Partner that is an estate, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust that is a Partner, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Partner under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt
or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within one hundred twenty (120) days after the commencement
thereof, (g) the appointment without the Partner's consent or acquiescence of a
trustee, receiver or liquidator has not been vacated or stayed within ninety
(90) days of such appointment, or (h) an appointment referred to in clause (g)
above is not vacated within ninety (90) days after the expiration of any such
stay.
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"Indemnitee" means (i) any Person made a party to a proceeding by reason of
its status as (A) the Previous General Partner or the General Partner or (B) a
director of the Previous General Partner or the General Partner or an officer or
employee of the Partnership or the Previous General Partner or the General
Partner and (ii) such other Persons (including Affiliates of the General Partner
or the Partnership) as the General Partner may designate from time to time
(whether before or after the event giving rise to potential liability), in its
sole and absolute discretion.
"Independent Director" has the meaning ascribed thereto in the Previous
General Partner's 1994 Stock Option Plan.
"Interest" means interest, original issue discount and other similar
payments or amounts paid by the Partnership for the use or forbearance of money.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Junior Share" means a share of the Previous General Partner's Class B
Common Stock, par value $.01 per share.
"Limited Partner" means the Special Limited Partner and any Person named as
a Limited Partner in Exhibit A attached hereto, as such Exhibit A may be amended
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Limited Partners and includes any and all benefits to which the
holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Limited Partner Interest may be expressed as
a number of Partnership Common Units, Partnership Preferred Units or other
Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1 hereof.
"Liquidator" has the meaning set forth in Section 13.2.A hereof.
"Majority in Interest of the Limited Partners" means Limited Partners
(other than (i) the Special Limited Partner and (ii) any Limited Partner fifty
percent (50%) or more of whose equity is owned, directly or indirectly, by the
(a) General Partner or (b) any REIT as to which the General Partner is a
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)))
holding more than fifty percent (50%) of the outstanding Partnership Common
Units and Class I High Performance Partnership Units held by all Limited
Partners (other than (i) the Special Limited Partner and (ii) any Limited
Partner fifty percent (50%) or more of whose equity is owned, directly or
indirectly, by (a) the General Partner or (b) any REIT as to which the General
Partner is a "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2))).
"Net Income" or "Net Loss" means, for each Fiscal Year of the Partnership,
an amount equal to the Partnership's taxable income or loss for such year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Net Income (or Net
Loss) pursuant to this definition of "Net Income" or "Net Loss" shall be
added to (or subtracted from, as the case may be) such taxable income (or
loss);
(b) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Income (or Net Loss) pursuant to this definition
of "Net Income" or "Net Loss," shall be subtracted from (or added to, as
the case may be) such taxable income (or loss);
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(c) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subsection (b) or subsection (c) of the definition of
"Gross Asset Value," the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost recovery
deductions that would otherwise be taken into account in computing such
taxable income or loss, there shall be taken into account Depreciation for
such Fiscal Year;
(f) To the extent that an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's interest in the
Partnership, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Income
or Net Loss; and
(g) Notwithstanding any other provision of this definition of "Net
Income" or "Net Loss," any item that is specially allocated pursuant to
Section 6.3 hereof shall not be taken into account in computing Net Income
or Net Loss. The amounts of the items of Partnership income, gain, loss or
deduction available to be specially allocated pursuant to Section 6.3
hereof shall be determined by applying rules analogous to those set forth
in this definition of "Net Income" or "Net Loss."
"New Securities" means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase REIT
Shares or Preferred Shares, excluding Junior Shares, Preferred Shares and grants
under the Previous General Partner's Stock Option Plans, or (ii) any Debt issued
by the Previous General Partner that provides any of the rights described in
clause (i).
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
form of Exhibit E attached to this Agreement.
"Optionee" means a Company Employee, Partnership Employee or Independent
Director to whom a stock option is granted under the Previous General Partner's
Stock Option Plans.
"Original Limited Partners" means the Persons listed as the Limited
Partners on Exhibit A originally attached to this Agreement, without regard to
any amendment thereto, and does not include any Assignee or other transferee,
including, without limitation, any Substituted Limited Partner succeeding to all
or any part of the Partnership Interest of any such Person.
"Ownership Limit" means the applicable restriction on ownership of shares
of the Previous General Partner imposed under the Charter.
"Partner" means the General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
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"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Fiscal Year shall be determined in
accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
"Partnership Common Unit" means a fractional share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1 and 4.2 hereof, but
does not include any Partnership Preferred Unit or any other Partnership Unit
specified in a Partnership Unit Designation as being other than a Partnership
Common Unit; provided, however, that the General Partner Interest and the
Limited Partner Interests shall have the differences in rights and privileges as
specified in this Agreement. The ownership of Partnership Common Units may (but
need not, in the sole and absolute discretion of the General Partner) be
evidenced by the form of certificate for Partnership Common Units attached
hereto as Exhibit F.
"Partnership Employee" has the meaning ascribed thereto in the Previous
General Partner's 1994 Stock Option Plan.
"Partnership Interest" means an ownership interest in the Partnership held
by either a Limited Partner or the General Partner and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. A Partnership Interest
may be expressed as a number of Partnership Common Units, Partnership Preferred
Units or other Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in Partnership Minimum Gain, for a Fiscal Year shall be
determined in accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Preferred Unit" means a fractional share of the Partnership
Interests that the General Partner has authorized pursuant to Section 4.2 hereof
that has distribution rights, or rights upon liquidation, winding up and
dissolution, that are superior or prior to the Partnership Common Units.
"Partnership Record Date" means the record date established by the General
Partner for the distribution of Available Cash pursuant to Section 5.1 hereof,
which record date shall generally be the same as the record date established by
the Previous General Partner for a distribution to its shareholders of some or
all of its portion of such distribution.
"Partnership Subsidiary" has the meaning ascribed thereto in the Apartment
Investment and Management Company 1997 Stock Award and Incentive Plan.
"Partnership Unit" shall mean a Partnership Common Unit, a Partnership
Preferred Unit or any other fractional share of the Partnership Interests that
the General Partner has authorized pursuant to Section 4.2 hereof.
"Partnership Unit Designation" shall have the meaning set forth in Section
4.2 hereof.
"Percentage Interest" means, as to each Partner, its interest in the
Partnership Units as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding.
"Permitted Transfer" has the meaning set forth in Section 11.3.A hereof.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
"Pledge" has the meaning set forth in Section 11.3.A hereof.
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"Preferred Share" means a share of capital stock of the Previous General
Partner now or hereafter authorized or reclassified that has dividend rights, or
rights upon liquidation, winding up and dissolution, that are superior or prior
to the REIT Shares.
"Previous General Partner" means Apartment Investment and Management
Company, a Maryland corporation.
"Previous General Partner's 1994 Stock Option Plan" means the 1994 Stock
Option Plan of Apartment Investment and Management Company and Affiliates.
"Previous General Partner's Stock Option Plans" means the Previous General
Partner's 1994 Stock Option Plan, the Apartment Investment and Management
Company 1996 Stock Award and Incentive Plan, the Amended and Restated Apartment
Investment and Management Company Non-Qualified Employee Stock Option Plan, the
Apartment Investment and Management Company 1997 Stock Award and Incentive Plan
and any other stock option plan adopted by the Previous General Partner.
"Primary Offering Notice" has the meaning set forth in Section 8.6.F(4)
hereof.
"Properties" means any assets and property of the Partnership such as, but
not limited to, interests in real property and personal property, including,
without limitation, fee interests, interests in ground leases, interests in
limited liability companies, joint ventures or partnerships, interests in
mortgages, and Debt instruments as the Partnership may hold from time to time.
"Public Offering Funding" has the meaning set forth in Section 8.6.D(2)
hereof.
"Public Offering Funding Amount" means the dollar amount equal to (i) the
product of (x) the number of Registrable Shares sold in a Public Offering
Funding and (y) the public offering price per share of such Registrable Shares
in such Public Offering Funding, less (ii) the aggregate underwriting discounts
and commissions in such Public Offering Funding.
"Qualified Transferee" means an "accredited investor" as defined in Rule
501 promulgated under the Securities Act.
"Qualifying Party" means (a) an Original Limited Partner, (b) an Additional
Limited Partner, (c) a Designated Party that is either a Substituted Limited
Partner or an Assignee, (d) a Family Member, or a lending institution as the
pledgee of a Pledge, who is the transferee in a Permitted Transfer or (e) with
respect to any Notice of Redemption delivered to the General Partner within the
time period set forth in Section 11.3.A(4) hereof, a Substituted Limited Partner
succeeding to all or part of the Limited Partner Interest of (i) an Original
Limited Partner, (ii) an Additional Limited Partner, (iii) a Designated Party
that is either a Substituted Limited Partner or an Assignee or (iv) a Family
Member, or a lending institution who is the pledgee of a Pledge, who is the
transferee in a Permitted Transfer.
"Redeemable Units" means those Partnership Common Units issued to the
Original Limited Partners as of the Effective Date together with such additional
Partnership Common Units that, after the Effective Date, may be issued to
Additional Limited Partners pursuant to Section 4.2 hereof.
"Redemption" has the meaning set forth in Section 8.6.A hereof.
"Registrable Shares" has the meaning set forth in Section 8.6.D(2) hereof.
"Regulations" means the applicable income tax regulations under the Code,
whether such regulations are in proposed, temporary or final form, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 6.3.B(viii)
hereof.
"REIT" means a real estate investment trust qualifying under Code Section
856.
"REIT Partner" means (a) a Partner that is, or has made an election to
qualify as, a REIT, (b) any "qualified REIT subsidiary" (within the meaning of
Code Section 856(i)(2)) of any Partner that is, or has made an election to
qualify as, a REIT and (c) any Partner, including, without limitation, the
General Partner
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and the Special Limited Partner, that is a "qualified REIT subsidiary" (within
the meaning of Code Section 856(i)(2)) of a REIT.
"REIT Payment" has the meaning set forth in Section 15.11 hereof.
"REIT Requirements" has the meaning set forth in Section 5.1.A hereof.
"REIT Share" means a share of the Previous General Partner's Class A Common
Stock, par value $.01 per share. Where relevant in this Agreement, "REIT
Shares" includes shares of the Previous General Partner's Class A Common Stock,
par value $.01 per share, issued upon conversion of Preferred Shares or Junior
Shares.
"REIT Shares Amount" means a number of REIT Shares equal to the product of
(a) the number of Tendered Units and (b) the Adjustment Factor; provided,
however, that, in the event that the Previous General Partner issues to all
holders of REIT Shares as of a certain record date rights, options, warrants or
convertible or exchangeable securities entitling the Previous General Partner's
shareholders to subscribe for or purchase REIT Shares, or any other securities
or property (collectively, the "Rights"), with the record date for such Rights
issuance falling within the period starting on the date of the Notice of
Redemption and ending on the day immediately preceding the Specified Redemption
Date, which Rights will not be distributed before the relevant Specified
Redemption Date, then the REIT Shares Amount shall also include such Rights that
a holder of that number of REIT Shares would be entitled to receive, expressed,
where relevant hereunder, in a number of REIT Shares determined by the Previous
General Partner in good faith.
"Related Party" means, with respect to any Person, any other Person whose
ownership of shares of the Previous General Partner's capital stock would be
attributed to the first such Person under Code Section 544 (as modified by Code
Section 856(h)(1)(B)).
"Rights" has the meaning set forth in the definition of "REIT Shares
Amount."
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Single Funding Notice" has the meaning set forth in Section 8.6.D(3)
hereof.
"Special Limited Partner" means AIMCO-LP, Inc., a Delaware corporation.
"Specified Redemption Date" means the later of (a) the tenth (10th)
Business Day after the receipt by the General Partner of a Notice of Redemption
or (b) in the case of a Declination followed by a Public Offering Funding, the
Business Day next following the date of the closing of the Public Offering
Funding; provided, however, that no Specified Redemption Date shall occur during
the first Twelve-Month Period; provided, further, that the Specified Redemption
Date, as well as the closing of Redemption, or an acquisition of Tendered Units
by the Previous General Partner pursuant to Section 8.6.B hereof, on any
Specified Redemption Date, may be deferred, in the General Partner's sole and
absolute discretion, for such time (but in any event not more than one hundred
fifty (150) days in the aggregate) as may reasonably be required to effect, as
applicable, (i) a Public Offering Funding or other necessary funding
arrangements, (ii) compliance with the Securities Act or other law (including,
but not limited to, (a) state "blue sky" or other securities laws and (b) the
expiration or termination of the applicable waiting period, if any, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and (iii)
satisfaction or waiver of other commercially reasonable and customary closing
conditions and requirements for a transaction of such nature.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person; provided, however, that, with respect to the
Partnership, "Subsidiary" means solely a partnership or limited liability
company (taxed, for federal income tax purposes, as a partnership and not as an
association or publicly traded partnership taxable as a corporation) of which
the Partnership is a member unless the General Partner has received an
unqualified opinion from independent counsel of recognized standing, or a ruling
from the IRS, that the ownership of shares of stock of a corporation or other
entity will
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not jeopardize the Previous General Partner's status as a REIT or the General
Partner's or the Special Limited Partner's status as a "qualified REIT
subsidiary" (within the meaning of Code Section 856(i)(2)), in which event the
term "Subsidiary" shall include the corporation or other entity which is the
subject of such opinion or ruling.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4 hereof.
"Tax Items" has the meaning set forth in Section 6.4.A hereof.
"Tendered Units" has the meaning set forth in Section 8.6.A hereof.
"Tendering Party" has the meaning set forth in Section 8.6.A hereof.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Transfer," when used with respect to a Partnership Unit, or all or any
portion of a Partnership Interest, means any sale, assignment, bequest,
conveyance, devise, gift (outright or in trust), Pledge, encumbrance,
hypothecation, mortgage, exchange, transfer or other disposition or act of
alienation, whether voluntary or involuntary or by operation of law; provided,
however, that when the term is used in Article 11 hereof, "Transfer" does not
include (a) any Redemption of Partnership Common Units by the Partnership, or
acquisition of Tendered Units by the Previous General Partner, pursuant to
Section 8.6 hereof or (b) any redemption of Partnership Units pursuant to any
Partnership Unit Designation. The terms "Transferred" and "Transferring" have
correlative meanings.
"Twelve-Month Period" means (a) as to an Original Limited Partner or any
successor-in-interest that is a Qualifying Party, a twelve-month period ending
on the day before the first (1st) anniversary of the Effective Date or on the
day before a subsequent anniversary thereof and (b) as to any other Qualifying
Party, a twelve-month period ending on the day before the first (1st)
anniversary of such Qualifying Party's becoming a Holder of Partnership Common
Units or on the day before a subsequent anniversary thereof; provided, however,
that the General Partner may, in its sole and absolute discretion, by written
agreement with a Qualifying Party, shorten the first Twelve-Month Period to a
period of less than twelve (12) months with respect to a Qualifying Party other
than an Original Limited Partner or successor-in-interest.
"Unitholder" means the General Partner or any Holder of Partnership Units.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the immediately
preceding Business Day.
"Value" means, on any Valuation Date with respect to a REIT Share, the
average of the daily market prices for ten (10) consecutive trading days
immediately preceding the Valuation Date (except that, as provided in Section
4.4.C. hereof, the market price for the trading day immediately preceding the
date of exercise of a stock option under the Previous General Partner's Stock
Option Plans shall be substituted for such average of daily market prices for
purposes of Section 4.4 hereof). The market price for any such trading day shall
be:
(i) if the REIT Shares are listed or admitted to trading on any
securities exchange or The Nasdaq Stock Market's National Market System,
the closing price, regular way, on such day, or if no such sale takes place
on such day, the average of the closing bid and asked prices on such day,
in either case as reported in the principal consolidated transaction
reporting system,
(ii) if the REIT Shares are not listed or admitted to trading on any
securities exchange or The Nasdaq Stock Market's National Market System,
the last reported sale price on such day or, if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the General Partner,
or
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(iii) if the REIT Shares are not listed or admitted to trading on any
securities exchange or The Nasdaq Stock Market's National Market System and
no such last reported sale price or closing bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reliable quotation source designated by the
General Partner, or if there shall be no bid and asked prices on such day,
the average of the high bid and low asked prices, as so reported, on the
most recent day (not more than ten (10) days prior to the date in question)
for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported during
the ten (10) days prior to the date in question, the Value of the REIT Shares
shall be determined by the General Partner acting in good faith on the basis of
such quotations and other information as it considers, in its reasonable
judgment, appropriate. In the event that the REIT Shares Amount includes Rights
(as defined in the definition of "REIT Shares Amount") that a holder of REIT
Shares would be entitled to receive, then the Value of such Rights shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization. The Partnership is a limited partnership
organized pursuant to the provisions of the Act and upon the terms and subject
to the conditions set forth in this Agreement. Except as expressly provided
herein to the contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the Act.
The Partnership Interest of each Partner shall be personal property for all
purposes.
Section 2.2 Name. The name of the Partnership is "AIMCO Properties, L.P."
The Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Partners of such change in the next regular communication to the Partners.
Section 2.3 Registered Office and Agent; Principal Office. The address of
the registered office of the Partnership in the State of Delaware is located at
32 Lockerman Square, Suite L-100, Dover, Delaware 19901, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office is The Prentice-Hall Corporation System, Inc. The principal
office of the Partnership is located at 1873 South Bellaire Street, Denver,
Colorado 80222, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems advisable.
Section 2.4 Power of Attorney.
A. Each Limited Partner and each Assignee hereby irrevocably constitutes
and appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, seal, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments, supplements or restatements thereof) that
the General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the Partnership
as a limited partnership (or a partnership in which the limited partners
have limited liability to the extent provided by applicable law) in the
State of Delaware and in all other jurisdictions in which the Partnership
may conduct business or own property; (b) all instruments that the General
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Partner deems appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with its terms;
(c) all conveyances and other instruments or documents that the General
Partner or the Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of
this Agreement, including, without limitation, a certificate of
cancellation; (d) all conveyances and other instruments or documents that
the General Partner or the Liquidator deems appropriate or necessary to
reflect the distribution or exchange of assets of the Partnership pursuant
to the terms of this Agreement; (e) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article 11, Article 12 or Article 13 hereof
or the Capital Contribution of any Partner; and (f) all certificates,
documents and other instruments relating to the determination of the
rights, preferences and privileges relating to Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments appropriate or
necessary, in the sole and absolute discretion of the General Partner, to
make, evidence, give, confirm or ratify any vote, consent, approval,
agreement or other action that is made or given by the Partners hereunder
or is consistent with the terms of this Agreement or appropriate or
necessary, in the sole and absolute discretion of the General Partner,
effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 hereof or as may be
otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and
a special power coupled with an interest, in recognition of the fact that each
of the Limited Partners and Assignees will be relying upon the power of the
General Partner or the Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited Partner
or Assignee and the Transfer all or any portion of such Limited Partner's or
Assignee's Partnership Units or Partnership Interest and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be bound
by any representation made by the General Partner or the Liquidator, acting in
good faith pursuant to such power of attorney; and each such Limited Partner or
Assignee hereby waives any and all defenses that may be available to contest,
negate or disaffirm the action of the General Partner or the Liquidator, taken
in good faith under such power of attorney. Each Limited Partner or Assignee
shall execute and deliver to the General Partner or the Liquidator, within
fifteen (15) days after receipt of the General Partner's or the Liquidator's
request therefor, such further designation, powers of attorney and other
instruments as the General Partner or the Liquidator, as the case may be, deems
necessary to effectuate this Agreement and the purposes of the Partnership.
Section 2.5 Term. The term of the Partnership commenced on May 16, 1994,
the date that the original Certificate was filed in the office of the Secretary
of State of Delaware in accordance with the Act, and shall continue until
December 31, 2093 unless the Partnership is dissolved sooner pursuant to the
provisions of Article 13 hereof or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of the
Partnership is to conduct any business, enterprise or activity permitted by or
under the Act, including, but not limited to, (i) to conduct the business of
ownership, construction, development and operation of multifamily rental
apartment communities, (ii) to enter into any partnership, joint venture,
business trust arrangement, limited liability company or other similar
arrangement to engage in any business permitted by or under the Act, or to own
interests in any entity engaged in any business permitted by or under the Act,
(iii) to conduct the business of providing property and asset management and
brokerage services, whether directly or through one or more partnerships, joint
ventures, subsidiaries, business trusts, limited liability companies or other
similar arrangements, and (iv) to do
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anything necessary or incidental to the foregoing; provided, however, such
business and arrangements and interests may be limited to and conducted in such
a manner as to permit the Previous General Partner, in the sole and absolute
discretion of the General Partner, at all times to be classified as a REIT.
Section 3.2 Powers.
A. The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership.
B. Notwithstanding any other provision in this Agreement, the General
Partner may cause the Partnership not to take, or to refrain from taking, any
action that, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Previous General
Partner to continue to qualify as a REIT, (ii) could subject the Previous
General Partner to any additional taxes under Code Section 857 or Code Section
4981 or (iii) could violate any law regulation of any governmental body or
agency having jurisdiction over the Previous General Partner, the General
Partner, their securities or the Partnership, unless such action (or inaction)
under clause (i), clause (ii) or clause (iii) above shall have been specifically
consented to by the Previous General Partner and the General Partner in writing.
Section 3.3 Partnership Only for Purposes Specified. The Partnership shall
be a limited partnership only for the purposes specified in Section 3.1 hereof,
and this Agreement shall not be deemed to create a company, venture or
partnership between or among the Partners with respect to any activities
whatsoever other than the activities within the purposes of the Partnership as
specified in Section 3.1 hereof. Except as otherwise provided in this Agreement,
no Partner shall have any authority to act for, bind, commit or assume any
obligation or responsibility on behalf of the Partnership, its properties or any
other Partner. No Partner, in its capacity as a Partner under this Agreement,
shall be responsible or liable for any indebtedness or obligation of another
Partner, nor shall the Partnership be responsible or liable for any indebtedness
or obligation of any Partner, incurred either before or after the execution and
delivery of this Agreement by such Partner, except as to those responsibilities,
liabilities, indebtedness or obligations incurred pursuant to and as limited by
the terms of this Agreement and the Act.
Section 3.4 Representations and Warranties by the Parties.
A. Each Partner that is an individual (including, without limitation, each
Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner)
represents and warrants to each other Partner(s) that (i) the consummation of
the transactions contemplated by this Agreement to be performed by such Partner
will not result in a breach or violation of, or a default under, any material
agreement by which such Partner any of such Partner's property is bound, or any
statute, regulation, order or other law to which such Partner is subject, (ii)
such Partner is neither a "foreign person" within the meaning of Code Section
1445(f) nor a "foreign partner" within the meaning of Code Section 1446(e),
(iii) such Partner does not own, directly or indirectly, (a) five percent (5%)
or more of the total combined voting power of all classes of stock entitled to
vote, or five percent (5%) or more of the total number of shares of all classes
of stock, of any corporation that is a tenant of either (I) the Previous General
Partner, the General Partner, the Special Limited Partner or any "qualified REIT
subsidiary" (within the meaning of Code Section 856(i)(2)) with respect to the
Previous General Partner, (II) the Partnership or (III) any partnership, venture
or limited liability company of which the Previous General Partner, the General
Partner, the Special Limited Partner, any "qualified REIT subsidiary" (within
the meaning of Code Section 856(i)(2)) with respect to the Previous General
Partner or the Partnership is a member or (b) an interest of five percent (5%)
or more in the assets or net profits of any tenant of either (I) the Previous
General Partner, the General Partner, the Special Limited Partner or any
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)) with
respect to the Previous General Partner, (II) the Partnership or (III) any
partnership, venture, or limited liability company of which the Previous General
Partner, the General Partner, the Special Limited Partner, any "qualified REIT
subsidiary" (within the meaning of Code Section 856(i)(2)) with respect to the
Previous General Partner or the Partnership is a member and (iv) this Agreement
is binding upon, and enforceable against, such Partner in accordance with its
terms.
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B. Each Partner that is not an individual (including, without limitation,
each Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner)
represents and warrants to each other Partner(s) that (i) all transactions
contemplated by this Agreement to be performed by it have been duly authorized
by all necessary action, including, without limitation, that of its general
partner(s), committee(s), trustee(s), beneficiaries, directors and/or
shareholder(s), as the case may be, as required, (ii) the consummation of such
transactions shall not result in a breach or violation of, or a default under,
its partnership or operating agreement, trust agreement, charter or bylaws, as
the case may be, any material agreement by which such Partner or any of such
Partner's properties or any of its partners, members, beneficiaries, trustees or
shareholders, as the case may be, is or are bound, or any statute, regulation,
order or other law to which such Partner or any of its partners, members,
trustees, beneficiaries or shareholders, as the case may be, is or are subject,
(iii) such Partner is neither a "foreign person" within the meaning of Code
Section 1445(f) nor a "foreign partner" within the meaning of Code Section
1446(e), (iv) such Partner does not own, directly or indirectly, (a) five
percent (5%) or more of the total combined voting power of all classes of stock
entitled to vote, or five percent (5%) or more of the total number of shares of
all classes of stock, of any corporation that is a tenant of either (I) the
Previous General Partner, the General Partner, the Special Limited Partner or
any "qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2))
with respect to the Previous General Partner, (II) the Partnership or (III) any
partnership, venture or limited liability company of which the Previous General
Partner, the General Partner, the Special Limited Partner, any "qualified REIT
subsidiary" (within the meaning of Code Section 856(i)(2)) with respect to the
Previous General Partner or the Partnership is a member or (b) an interest of
five percent (5%) or more in the assets or net profits of any tenant of either
(I) the Previous General Partner, the General Partner the Special Limited
Partner or any "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2)) with respect to the Previous General Partner, (II) the Partnership or
(III) any partnership, venture or limited liability company for which the
Previous General Partner, the General Partner, the Special Limited Partner, any
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)) with
respect to the Previous General Partner or the Partnership is a member and (v)
this Agreement is binding upon, and enforceable against, such Partner in
accordance with its terms.
C. Each Partner (including, without limitation, each Substituted Limited
Partner as a condition to becoming a Substituted Limited Partner) represents,
warrants and agrees that it has acquired and continues to hold its interest in
the Partnership for its own account for investment only and not for the purpose
of, or with a view toward, the resale or distribution of all or any part
thereof, nor with a view toward selling or otherwise distributing such interest
or any part thereof at any particular time or under any predetermined
circumstances. Each Partner further represents and warrants that it is a
sophisticated investor, able and accustomed to handling sophisticated financial
matters for itself, particularly real estate investments, and that it has a
sufficiently high net worth that it does not anticipate a need for the funds
that it has invested in the Partnership in what it understands to be a highly
speculative and illiquid investment.
D. The representations and warranties contained in Sections 3.4.A, 3.4.B
and 3.4.C hereof shall survive the execution and delivery of this Agreement by
each Partner (and, in the case of an Additional Limited Partner or a Substituted
Limited Partner, the admission of such Additional Limited Partner or Substituted
Limited Partner as a Limited Partner in the Partnership) and the dissolution,
liquidation and termination of the Partnership.
E. Each Partner (including, without limitation, each Substituted Limited
Partner as a condition to becoming a Substituted Limited Partner) hereby
acknowledges that no representations as to potential profit, cash flows, funds
from operations or yield, if any, in respect of the Partnership or the General
Partner have been made by any Partner or any employee or representative or
Affiliate of any Partner, and that projections and any other information,
including, without limitation, financial and descriptive information and
documentation, that may have been in any manner submitted to such Partner shall
not constitute any representation or warranty of any kind or nature, express or
implied.
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ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners. The Partners have
heretofore made Capital Contributions to the Partnership. Each Partner owns
Partnership Units in the amount set forth for such Partner on Exhibit A, as the
same may be amended from time to time by the General Partner to the extent
necessary to reflect accurately sales, exchanges or other Transfers,
redemptions, Capital Contributions, the issuance of additional Partnership
Units, or similar events having an effect on a Partner's ownership of
Partnership Units. Except as provided by law or in Section 4.2, 4.3 or 10.4
hereof, the Partners shall have no obligation or right to make any additional
Capital Contributions or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests.
A. General. The General Partner is hereby authorized to cause the
Partnership to issue additional Partnership Interests, in the form of
Partnership Units, for any Partnership purpose, at any time or from time to
time, to the Partners (including the General Partner and the Special Limited
Partner) or to other Persons, and to admit such Persons as Additional Limited
Partners, for such consideration and on such terms and conditions as shall be
established by the General Partner in its sole and absolute discretion, all
without the approval of any Limited Partners. Without limiting the foregoing,
the General Partner is expressly authorized to cause the Partnership to issue
Partnership Units (i) upon the conversion, redemption or exchange of any Debt,
Partnership Units or other securities issued by the Partnership, (ii) for less
than fair market value, so long as the General Partner concludes in good faith
that such issuance is in the best interests of the General Partner and the
Partnership, and (iii) in connection with any merger of any other Person into
the Partnership if the applicable merger agreement provides that Persons are to
receive Partnership Units in exchange for their interests in the Person merging
into the Partnership. Subject to Delaware law, any additional Partnership
Interests may be issued in one or more classes, or one or more series of any of
such classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as shall be determined by
the General Partner, in its sole and absolute discretion without the approval of
any Limited Partner, and set forth in a written document thereafter attached to
and made an exhibit to this Agreement (each, a "Partnership Unit Designation").
Without limiting the generality of the foregoing, the General Partner shall have
authority to specify (a) the allocations of items of Partnership income, gain,
loss, deduction and credit to each such class or series of Partnership
Interests; (b) the right of each such class or series of Partnership Interests
to share in Partnership distributions; (c) the rights of each such class or
series of Partnership Interests upon dissolution and liquidation of the
Partnership; (d) the voting rights, if any, of each such class or series of
Partnership Interests; and (e) the conversion, redemption or exchange rights
applicable to each such class or series of Partnership Interests. Upon the
issuance of any additional Partnership Interest, the General Partner shall amend
Exhibit A as appropriate to reflect such issuance.
B. Issuances to the General Partner or Special Limited Partner. No
additional Partnership Units shall be issued to the General Partner or the
Special Limited Partner unless (i) the additional Partnership Units are issued
to all Partners in proportion to their respective Percentage Interests, (ii) (a)
the additional Partnership Units are (x) Partnership Common Units issued in
connection with an issuance of REIT Shares, or (y) Partnership Units (other than
Partnership Common Units) issued in connection with an issuance of Preferred
Shares, New Securities or other interests in the Previous General Partner (other
than REIT Shares), which Preferred Shares, New Securities or other interests
have designations, preferences and other rights, terms and provisions that are
substantially the same as the designations, preferences and other rights, terms
and provisions of the additional Partnership Units issued to the General Partner
or the Special Limited Partner, and (b) the General Partner or the Special
Limited Partner, as the case may be, contributes to the Partnership the cash
proceeds or other consideration received in connection with the issuance of such
REIT Shares, Preferred Shares, New Securities or other interests in the Previous
General Partner, (iii) the additional Partnership Units are issued upon the
conversion, redemption or exchange of Debt, Partnership Units or other
securities issued by the Partnership, or (iv) the additional Partnership Units
are issued pursuant to Section 4.6.
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C. No Preemptive Rights. No Person, including, without limitation, any
Partner or Assignee, shall have any preemptive, preferential, participation or
similar right or rights to subscribe for or acquire any Partnership Interest.
Section 4.3 Additional Funds.
A. General. The General Partner may, at any time and from time to time,
determine that the Partnership requires additional funds ("Additional Funds")
for the acquisition or development of additional Properties, for the redemption
of Partnership Units or for such other purposes as the General Partner may
determine. Additional Funds may be obtained by the Partnership, at the election
of the General Partner, in any manner provided in, and in accordance with, the
terms of this Section 4.3 without the approval of any Limited Partners.
B. Additional Capital Contributions. The General Partner, on behalf of the
Partnership, may obtain any Additional Funds by accepting Capital Contributions
from any Partners or other Persons and issuing additional Partnership Units in
consideration therefor.
C. Loans by Third Parties. The General Partner, on behalf of the
Partnership, may obtain any Additional Funds by causing the Partnership to incur
Debt to any Person (other than the Previous General Partner, the General Partner
or the Special Limited Partner) upon such terms as the General Partner
determines appropriate, including making such Debt convertible, redeemable or
exchangeable for Partnership Units; provided, however, that the Partnership
shall not incur any such Debt if (i) breach, violation or default of such Debt
would be deemed to occur by virtue of the Transfer of any Partnership Interest,
or (ii) such Debt is recourse to any Partner (unless the Partner otherwise
agrees).
D. General Partner Loans. The General Partner, on behalf of the
Partnership, may obtain any Additional Funds by causing the Partnership to incur
Debt with the Previous General Partner, the General Partner or the Special
Limited Partner (each, a "General Partner Loan") if (i) such Debt is, to the
extent permitted by law, on substantially the same terms and conditions
(including interest rate, repayment schedule, and conversion, redemption,
repurchase and exchange rights) as Funding Deb incurred by the Previous General
Partner, the General Partner or the Special Limited Partner, the net proceeds of
which are loaned to the Partnership to provide such Additional Funds, or (ii)
such Debt is on terms and conditions no less favorable to the Partnership than
would be available to the Partnership from any third party; provided, however,
that the Partnership shall not incur any such Debt if (a) a breach, violation or
default of such Debt would be deemed to occur by virtue of the Transfer of any
Partnership Interest, or (b) such Debt is recourse to any Partner (unless the
Partner otherwise agrees).
E. Issuance of Securities by the Previous General Partner. The Previous
General Partner shall not issue any additional REIT Shares, Preferred Shares,
Junior Shares or New Securities unless (i) the Previous General Partner
contributes the cash proceeds or other consideration received from the issuance
of such additional REIT Shares, Preferred Shares, Junior Shares or New
Securities, as the case may be, and from the exercise of the rights contained in
any such additional New Securities, either or both of the General Partner and
the Special Limited Partner, and (ii) it or they, as the case may be, contribute
such cash proceeds or other consideration to the Partnership in exchange for (x)
in the case of an issuance of REIT Shares, Partnership Common Units, or (y) in
the case of an issuance of Preferred Shares, Junior Shares or New Securities,
Partnership Units with designations, preferences and other rights, terms and
provisions that are substantially the same as the designations, preferences and
other rights, terms and provisions of such Preferred Shares, Junior Shares or
New Securities; provided, however, that notwithstanding the foregoing, the
Previous General Partner may issue REIT Shares, Preferred Shares, Junior Shares
or New Securities (a) pursuant to Section 4.4 or Section 8.6.B hereof, (b)
pursuant to a dividend or distribution (including any stock split) of REIT
Shares, Preferred Shares, Junior Shares or New Securities to all of the holders
of REIT Shares, Preferred Shares, Junior Shares or New Securities, as the case
may be, (c) upon a conversion, redemption or exchange of Preferred Shares, (d)
upon a conversion of Junior Shares into REIT Shares, (e) upon a conversion,
redemption, exchange or exercise of New Securities, or (f) in connection with an
acquisition of a property or other asset to be owned, directly or indirectly, by
the Previous General Partner if the General Partner determines that such
acquisition is in the best interests of the Partnership. In the event of any
issuance
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of additional REIT Shares, Preferred Shares, Junior Shares or New Securities by
the Previous General Partner, and the contribution to the Partnership, by the
General Partner or the Special Limited Partner, of the cash proceeds or other
consideration received from such issuance, the Partnership shall pay the
Previous General Partner's expenses associated with such issuance, including any
underwriting discounts or commissions.
Section 4.4 Stock Option Plans.
A. Options Granted to Company Employees and Independent Directors. If at
any time or from time to time, in connection with the Previous General Partner's
Stock Option Plans, a stock option granted to a Company Employee or Independent
Director is duly exercised:
(1) The Special Limited Partner shall, as soon as practicable after
such exercise, make a Capital Contribution to the Partnership in an amount
equal to the exercise price paid to the Previous General Partner by such
exercising party in connection with the exercise of such stock option.
(2) Notwithstanding the amount of the Capital Contribution actually
made pursuant to Section 4.4.A(1) hereof, the Special Limited Partner shall
be deemed to have contributed to the Partnership as a Capital Contribution,
in consideration of an additional Limited Partner Interest (expressed in
and as additional Partnership Common Units), an amount equal to the Value
of a REIT Share as of the date of exercise multiplied by the number of REIT
Shares then being issued in connection with the exercise of such stock
option.
(3) An equitable Percentage Interest adjustment shall be made in which
the Special Limited Partner shall be treated as having made a cash
contribution equal to the amount described in Section 4.4.A(2) hereof.
B. Options Granted to Partnership Employees. If at any time or from time to
time, in connection with the Previous General Partner's Stock Option Plans, a
stock option granted to a Partnership Employee is duly exercised:
(1) The General Partner shall cause the Previous General Partner to
sell to the Partnership, and the Partnership shall purchase from the
Previous General Partner, the number of REIT Shares as to which such stock
option is being exercised. The purchase price per REIT Share for such sale
of REIT Shares to the Partnership shall be the Value of a REIT Share as of
the date of exercise of such stock option.
(2) The Partnership shall sell to the Optionee (or if the Optionee is
an employee of a Partnership Subsidiary, the Partnership shall sell to such
Partnership Subsidiary, which in turn shall sell to the Optionee), for a
cash price per share equal to the Value of a REIT Share at the time of the
exercise, the number of REIT Shares equal to (a) the exercise price paid to
the Previous General Partner by the exercising party in connection with the
exercise of such stock option divided by (b) the Value of a REIT Share at
the time of such exercise.
(3) The Partnership shall transfer to the Optionee (or if the Optionee
is an employee of a Partnership Subsidiary, the Partnership shall transfer
to such Partnership Subsidiary, which in turn shall transfer to the
Optionee) at no additional cost, as additional compensation, the number of
REIT Shares equal to the number of REIT Shares described in Section
4.4.B(1) hereof less the number of REIT Shares described in Section
4.4.B(2) hereof.
(4) The Special Limited Partner shall, as soon as practicable after
such exercise, make a Capital Contribution to the Partnership of an amount
equal to all proceeds received (from whatever source, but excluding any
payment in respect of payroll taxes or other withholdings) by the Previous
General Partner, the General Partner or the Special Limited Partner in
connection with the exercise of such stock option. An equitable Percentage
Interest adjustment shall be made in which the Special Limited Partner
shall be treated as having made a cash contribution equal to the amount
described in Section 4.4.B(1) hereof.
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C. Special Valuation Rule. For purposes of this Section 4.4, in determining
the Value of a REIT Share, only the trading date immediately preceding the
exercise of the relevant stock option under the Previous General Partner's Stock
Option Plans shall be considered.
D. Future Stock Incentive Plans. Nothing in this Agreement shall be
construed or applied to preclude or restrain the Previous General Partner, the
General Partner or the Special Limited Partner from adopting, modifying or
terminating stock incentive plans, in addition to the Previous General Partner's
Stock Option Plans, for the benefit of employees, directors or other business
associates of the Previous General Partner, the General Partner, the Special
Limited Partner, the Partnership any of their Affiliates. The Limited Partners
acknowledge and agree that, in the event that any such plan is adopted, modified
or terminated by the Previous General Partner, the General Partner or the
Special Limited Partner amendments to this Section 4.4 may become necessary or
advisable and that any approval or consent to any such amendments requested by
the Previous General Partner, the General Partner or the Special Limited Partner
shall not be unreasonably withheld or delayed.
Section 4.5 No Interest; No Return. No Partner shall be entitled to
interest on its Capital Contribution or on such Partner's Capital Account.
Except as provided herein or by law, no Partner shall have any right to demand
or receive the return of its Capital Contribution from the Partnership.
Section 4.6 Conversion of Junior Shares. If, at any time, any of the
Junior Shares are converted into REIT Shares, in whole or in part, then a number
of Partnership Common Units equal to (i) the number of REIT Shares issued upon
such conversion divided by (ii) the Adjustment Factor then in effect shall be
issued to the General Partner and the Special Limited Partner (and between the
General Partner and the Special Limited Partner in proportion to their ownership
of Partnership Common Unit immediately preceding such conversion), and the
Percentage Interests of the General Partner and the Limited Partners (including
the Special Limited Partner) shall be adjusted to reflect such conversion.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions. Subject to
the terms of any Partnership Unit Designation, the General Partner shall cause
the Partnership to distribute quarterly all, or such portion as the General
Partner may in its sole and absolute discretion determine, of Available Cash
generated by the Partnership during such quarter to the Holders of Partnership
Common Units in accordance with their respective Partnership Common Units held
on such Partnership Record Date. Except as otherwise provided in the terms of
any Partnership Unit Designation, distributions payable with respect to any
Partnership Units (other than Partnership Units held by the General Partner or
the Special Limited Partner) that were not outstanding during the entire
quarterly period in respect of which any distribution is made shall be prorated
based on the portion of the period that such units were outstanding. The General
Partner in its sole and absolute discretion may distribute to the Unitholders
Available Cash on a more frequent basis and provide for an appropriate record
date. The General Partner shall take such reasonable efforts, as determined by
it in its sole and absolute discretion and consistent with the Previous General
Partner's qualification as a REIT, to cause the Partnership to distribute
sufficient amounts to enable (i) the General Partner and the Special Limited
Partner to transfer funds to the Previous General Partner and (ii) the Previous
General Partner to pay shareholder dividends that will (a) satisfy the
requirements for qualifying as a REIT under the Code and Regulations (the "REIT
Requirements") and (b) avoid any federal income or excise tax liability of the
Previous General Partner.
Section 5.2 Distributions in Kind. No right is given to any Unitholder to
demand and receive property other than cash as provided in this Agreement. The
General Partner may determine, in its sole and absolute discretion, to make a
distribution in kind of Partnership assets to the Unitholders, and such assets
shall be distributed in such a fashion as to ensure that the fair market value
is distributed and allocated in accordance with Articles 5, 6 and 10 hereof.
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Section 5.3 Amounts Withheld. All amounts withheld pursuant to the Code or
any provisions of any state or local tax law and Section 10.4 hereof with
respect to any allocation, payment or distribution to any Unitholder shall be
treated as amounts paid or distributed to such Unitholder pursuant to Section
5.1 hereof for all purposes under this Agreement.
Section 5.4 Distributions Upon Liquidation. Notwithstanding the other
provisions of this Article 5, net proceeds from a Terminating Capital
Transaction, and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership, shall be distributed to the
Unitholders in accordance with Section 13.2 hereof.
Section 5.5 Restricted Distributions. Notwithstanding any provision to the
contrary contained in this Agreement, neither the Partnership nor the General
Partner, on behalf of the Partnership, shall make a distribution to any
Unitholder on account of its Partnership Interest or interest in Partnership
Units if such distribution would violate Section 17-607 of the Act or other
applicable law.
ARTICLE 6
ALLOCATIONS
Section 6.1 Timing and Amount of Allocations of Net Income and Net
Loss. Net Income and Net Loss of the Partnership shall be determined and
allocated with respect to each Fiscal Year of the Partnership as of the end of
each such year. Except as otherwise provided in this Article 6, and subject to
Section 11.6.C hereof, an allocation to a Unitholder of a share of Net Income or
Net Loss shall be treated as an allocation of the same share of each item of
income, gain, loss or deduction that taken into account in computing Net Income
or Net Loss.
Section 6.2 General Allocations. Subject to the terms of any Partnership
Unit Designation, except as otherwise provided in this Article 6 and subject to
Section 11.6.C hereof, Net Income and Net Loss shall be allocated to each of the
Holders of Partnership Common Units in accordance with their respective
Partnership Common Units at the end of each Fiscal Year.
Section 6.3 Additional Allocation Provisions. Notwithstanding the
foregoing provisions of this Article 6:
A. Intentionally Omitted.
B. Regulatory Allocations.
(i) Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of Section
6.2 hereof, or any other provision of this Article 6, if there is a net
decrease in Partnership Minimum Gain during any Fiscal Year, each Holder of
Partnership Common Units shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Holder's share of the net decrease in Partnership
Minimum Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each Holder pursuant
thereto. The items to be allocated shall be determined in accordance with
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.B(i)
is intended to qualify as a "minimum gain chargeback" within the meaning of
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
(ii) Partner Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(i)(4) or in Section 6.3.B(i) hereof, if there
is a net decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt during any Fiscal Year, each Holder of Partnership Common
Units who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal
to such Holder's share of the net decrease in Partner Minimum Gain
attributable to such Partner
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Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each
General Partner, Limited Partner and other Holder pursuant thereto. The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.B(ii) is
intended to qualify as a "chargeback of partner nonrecourse debt minimum
gain" within the meaning of Regulations Section 1.704-2(i) and shall be
interpreted consistently therewith.
(iii) Nonrecourse Deductions and Partner Nonrecourse Deductions. Any
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to
the Holders of Partnership Common Units in accordance with their
Partnership Common Units. Any Partner Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Holder(s) who bears the economic
risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable, in accordance with
Regulations Section 1.704-2(i).
(iv) Qualified Income Offset. If any Holder of Partnership Common
Units unexpectedly receives an adjustment, allocation or distribution
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items
of Partnership income and gain shall be allocated, in accordance with
Regulations Section 1.704-1(b)(2)(ii)(d), to such Holder in an amount and
manner sufficient to eliminate, to the extent required by such Regulations,
the Adjusted Capital Account Deficit of such Holder as quickly as possible,
provided that an allocation pursuant to this Section 6.3.B(iv) shall be
made if and only to the extent that such Holder would have an Adjusted
Capital Account Deficit after all other allocations provided in this
Article 6 have been tentatively made as if this Section 6.3.B(iv) were not
in the Agreement. It is intended that this Section 6.3.B(iv) qualify and be
construed as a "qualified income offset" within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
(v) Gross Income Allocation. In the event that any Holder of
Partnership Common Units has a deficit Capital Account at the end of any
Fiscal Year that is in excess of the sum of (1) the amount (if any) that
such Holder is obligated to restore to the Partnership upon complete
liquidation of such Holder's Partnership Interest (including, the Holder's
interest in outstanding Partnership Preferred Units and other Partnership
Units) and (2) the amount that such Holder is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Holder shall be specially
allocated items of Partnership income and gain in the amount of such excess
to eliminate such deficit as quickly as possible, provided that an
allocation pursuant to this Section 6.3.B(v) shall be made if and only to
the extent that such Holder would have a deficit Capital Account in excess
of such sum after all other allocations provided in this Article 6 have
been tentatively made as if this Section 6.3.B(v) and Section 6.3.B(iv)
hereof were not in the Agreement.
(vi) Limitation on Allocation of Net Loss. To the extent that any
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Holder of Partnership Common Units, such allocation of
Net Loss shall be reallocated among the other Holders of Partnership Common
Units in accordance with their respective Partnership Common Units, subject
to the limitations of this Section 6.3.B(vi).
(vii) Section 754 Adjustment. To the extent that an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to
be taken into account in determining Capital Accounts as the result of a
distribution to a Holder of Partnership Common Units in complete
liquidation of its interest in the Partnership, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated
to the Holders in accordance with their Partnership Common Units in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the
Holders to whom such distribution was made in the event that Regulations
Section 1.704-1(b)(2)(iv)(m)(4) applies.
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(viii) Curative Allocations. The allocations set forth in Sections
6.3.B(i), (ii), (iii), (iv), (v), (vi) and (vii) hereof (the "Regulatory
Allocations") are intended to comply with certain regulatory requirements,
including the requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Section 6.1 hereof, the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Holders of Partnership Common
Units so that to the extent possible without violating the requirements
giving rise to the Regulatory Allocations, the net amount of such
allocations of other items and the Regulatory Allocations to each Holder of
a Partnership Common Unit shall be equal to the net amount that would have
been allocated to each such Holder if the Regulatory Allocations had not
occurred.
C. Special Allocations Upon Liquidation. Notwithstanding any provision in
this Article VI to the contrary, in the event that the Partnership disposes of
all or substantially all of its assets in a transaction that will lead to a
liquidation of the Partnership pursuant to Article XIII hereof, then any Net
Income or Net Loss realized in connection with such transaction and thereafter
(and, if necessary, constituent items of income, gain, loss and deduction) shall
be specially allocated the Partners as required so as to cause liquidating
distributions pursuant to Section 13.2.A(4) hereof to be made in the same
amounts and proportions as would have resulted had such distributions instead
been made pursuant to Section 5.1 hereof.
D. Allocation of Excess Nonrecourse Liabilities. For purposes of
determining a Holder's proportional share of the "excess nonrecourse
liabilities" of the Partnership within the meaning of Regulations Section
1.752-3(a)(3), each Holder's interest in Partnership profits shall be such
Holder's share of Partnership Common Units.
Section 6.4 Tax Allocations.
A. In General. Except as otherwise provided in this Section 6.4, for income
tax purposes under the Code and the Regulations each Partnership item of income,
gain, loss and deduction (collectively, "Tax Items") shall be allocated among
the Holders of Partnership Common Units in the same manner as its correlative
item of "book" income, gain, loss or deduction is allocated pursuant to Sections
6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c) Revaluations. Notwithstanding
Section 6.4.A hereof, Tax Items with respect to Property that is contributed to
the Partnership with a Gross Asset Value that varies from its basis in the hands
of the contributing Partner immediately preceding the date of contribution shall
be allocated among the Holders of Partnership Common Units for income tax
purposes pursuant to Regulations promulgated under Code Section 704(c) so as to
take into account such variation. The Partnership shall account for such
variation under any method approved under Code Section 704(c) and the applicable
Regulations as chosen by the General Partner, including, without limitation, the
"traditional method" as described in Regulations Section 1.704-3(b). In the
event that the Gross Asset Value of any partnership asset is adjusted pursuant
to subsection (b) of the definition of "Gross Asset Value" (provided in Article
1 hereof), subsequent allocations of Tax Items with respect to such asset shall
take account of the variation, if any, between the adjusted basis of such asset
and its Gross Asset Value in the same manner as under Code Section 704(c) and
the applicable Regulations.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
A. Except as otherwise expressly provided in this Agreement, all management
powers over the business and affairs of the Partnership are and shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Partners with or without cause, except with the Consent of the General
Partner. In addition to the now or hereafter granted a general partner of a
limited partnership under applicable law or that are granted to the General
Partner under any other
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provision of this Agreement, the General Partner, subject to the other
provisions hereof including Section 7.3, shall have full power and authority to
do all things deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 hereof and to
effectuate the purposes set forth in Section 3.1 hereof, including, without
limitation:
(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and borrowing
money to permit the Partnership to make distributions to its Partners in
such amounts as will permit the Previous General Partner (so long as the
Previous General Partner qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any excise tax pursuant to
Code Section 4981) and to make distribution its shareholders sufficient to
permit the Previous General Partner to maintain REIT status or otherwise to
satisfy the REIT Requirements), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of same by deed to secure
debt, mortgage, deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations that it deems
necessary for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(3) the acquisition, sale, transfer, exchange or other disposition of
any assets of the Partnership (including, but not limited to, the exercise
or grant of any conversion, option, privilege or subscription right or any
other right available in connection with any assets at any time held by the
Partnership) or the merger, consolidation, reorganization or other
combination of the Partnership with or into another entity;
(4) the mortgage, pledge, encumbrance or hypothecation of any assets
of the Partnership, the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent with the terms
of this Agreement and on any terms that it sees fit, including, without
limitation, the financing of the operations and activities of the General
Partner, the Partnership or any of the Partnership's Subsidiaries, the
lending of funds to other Persons (including, without limitation, the
Partnership's Subsidiaries) and the repayment of obligations of the
Partnership, its Subsidiaries and any other Person in which it has an
equity investment, and the making of capital contributions to and equity
investments in the Partnership's Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition, replacement or improvement of any Property,
including, without limitation, any Contributed Property, or other asset of
the Partnership or any Subsidiary;
(6) the negotiation, execution and performance of any contracts,
leases, conveyances or other instruments that the General Partner considers
useful or necessary to the conduct of the Partnership's operations or the
implementation of the General Partner's powers under this Agreement,
including contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and other agents
and the payment of their expenses and compensation out of the Partnership's
assets;
(7) the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement, the holding, management, investment and
reinvestment of cash and other assets of the Partnership, and the
collection and receipt of revenues, rents and income of the Partnership;
(8) the selection and dismissal of employees of the Partnership or the
General Partner (including, without limitation, employees having titles or
offices such as "president," "vice president," "secretary" and
"treasurer"), and agents, outside attorneys, accountants, consultants and
contractors of the Partnership or the General Partner and the determination
of their compensation and other terms of employment or hiring;
(9) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
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(10) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general partnerships,
limited liability companies, joint ventures or other relationships that it
deems desirable (including, without limitation, the acquisition of
interests in, and the contributions of property to, any Subsidiary and any
other Person in which it has an equity investment from time to time);
provided, however, that, as long as the Previous General Partner has
determined to continue to qualify as a REIT, the General Partner may not
engage in any such formation, acquisition or contribution that would cause
the Previous General Partner to fail to qualify as a REIT or the General
Partner to fail to qualify as a "qualified REIT subsidiary" within the
meaning of Code Section 856(i)(2);
(11) the control of any matters affecting the rights and obligations
of the Partnership, including the settlement, compromise, submission to
arbitration or any other form of dispute resolution, or abandonment, of any
claim, cause of action, liability, debt or damages, due or owing to or from
the Partnership, the commencement or defense of suits, legal proceedings,
administrative proceedings, arbitrations or other forms of dispute
resolution, and the representation of the Partnership in all suits or legal
proceedings, administrative proceedings, arbitrations or other forms of
dispute resolution, the incurring of legal expense, and the indemnification
of any Person against liabilities and contingencies to the extent permitted
by law;
(12) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any Subsidiary or any other
Person (including, without limitation, the contribution or loan of funds by
the Partnership to such Persons);
(13) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of valuation as
it may adopt; provided that such methods are otherwise consistent with the
requirements of this Agreement;
(14) the enforcement of any rights against any Partner pursuant to
representations, warranties, covenants and indemnities relating to such
Partner's contribution of property or assets to the Partnership;
(15) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;
(16) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership
has a direct or indirect interest, or jointly with any such Subsidiary or
other Person;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest, pursuant to contractual or other
arrangements with such Person;
(18) the making, execution and delivery of any and all deeds, leases,
notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties, indemnities,
waivers, releases or legal instruments or agreements in writing necessary
or appropriate in the judgment of the General Partner for the
accomplishment of any of the powers of the General Partner enumerated in
this Agreement;
(19) the issuance of additional Partnership Units, as appropriate and
in the General Partner's sole and absolute discretion, in connection with
Capital Contributions by Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4 hereof; and
(20) an election to dissolve the Partnership pursuant to Section
13.1.C hereof.
B. Each of the Limited Partners agrees that, except as provided in Section
7.3 hereof, the General Partner is authorized to execute, deliver and perform
the above-mentioned agreements and transactions on behalf of the Partnership
without any further act, approval or vote of the Partners, notwithstanding any
other provision of this Agreement (except as provided in Section 7.3 hereof),
the Act or any applicable law, rule or regulation. The execution, delivery or
performance by the General Partner or the Partnership of any
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agreement authorized or permitted under this Agreement shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement or
of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may
cause the Partnership to obtain and maintain (i) casualty, liability and other
insurance on the Properties of the Partnership and (ii) liability insurance for
the Indemnitees hereunder.
D. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain working capital and other
reserves in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the General Partner
may, but shall be under no obligation to, take into account the tax consequences
to any Partner (including the General Partner) of any action taken by it. The
General Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of an income tax liability incurred
by such Limited Partner as a result of an action (or inaction) by the General
Partner pursuant to its authority under this Agreement so long as the action or
inaction is taken in good faith.
Section 7.2 Certificate of Limited Partnership. To the extent that such
action is determined by the General Partner to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate and do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of Delaware and each other state, the
District of Columbia or any other jurisdiction, in which the Partnership may
elect to do business or own property. Subject to the terms of Section 8.5.A(4)
hereof, the General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate or any amendment thereto to any
Limited Partner. The General Partner shall use all reasonable efforts to cause
to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability to the extent provided by applicable law) in the
State of Delaware and any other state, or the District of Columbia or other
jurisdiction, in which the Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partner's Authority.
A. The General Partner may not take any action in contravention of this
Agreement, including, without limitation:
(1) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement;
(2) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose except as
otherwise provided in this Agreement;
(3) admit a Person as a Partner, except as otherwise provided in this
Agreement;
(4) perform any act that would subject a Limited Partner to liability
as a general partner in any jurisdiction or any other liability except as
provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other agreement that
prohibits or restricts, or has the effect of prohibiting or restricting,
the ability of (a) the General Partner, the Previous General Partner or the
Partnership from satisfying its obligations under Section 8.6 hereof in
full or (b) a Limited Partner from exercising its rights under Section 8.6
hereof to effect a Redemption in full, except, in either case, with the
written consent of such Limited Partner affected the prohibition or
restriction.
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B. The General Partner shall not, without the prior Consent of the Limited
Partners, undertake, on behalf of the Partnership, any of the following actions
or enter into any transaction that would have the effect of such transactions:
(1) except as provided in Section 7.3.C hereof, amend, modify or
terminate this Agreement other than to reflect the admission, substitution,
termination or withdrawal of Partners pursuant to Article 11 or Article 12
hereof;
(2) make a general assignment for the benefit of creditors or appoint
or acquiesce in the appointment of a custodian, receiver or trustee for all
or any part of the assets of the Partnership;
(3) institute any proceeding for bankruptcy on behalf of the
Partnership; or
(4) subject to the rights of Transfer provided in Sections 11.1.C and
11.2 hereof, approve or acquiesce to the Transfer of the Partnership
Interest of the General Partner, or admit into the Partnership any
additional or successor General Partners.
C. Notwithstanding Section 7.3.B hereof, the General Partner shall have the
power, without the Consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of the
General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution or withdrawal of Partners
or the termination of the Partnership in accordance with this Agreement,
and to amend Exhibits A and C in connection with such admission,
substitution or withdrawal;
(3) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect, or to
cure any ambiguity, correct or supplement any provision in this Agreement
not inconsistent with law or with other provisions, or make other changes
with respect to matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this Agreement;
(4) to satisfy any requirements, conditions or guidelines contained in
any order, directive, opinion, ruling or regulation of a federal or state
agency or contained in federal or state law;
(5) (a) to reflect such changes as are reasonably necessary (i) for
either the General Partner or the Special Limited Partner, as the case may
be, to maintain its status as a "qualified REIT subsidiary" within the
meaning of Code Section 856(i)(2) or (ii) for the Previous General Partner
to maintain its status as a REIT or to satisfy the REIT Requirement; (b) to
reflect the Transfer of all or any part of a Partnership Interest among the
Previous General Partner, the General Partner, the Special Limited Partner
or any other "qualified REIT subsidiary" (within the meaning of Code
Section 856(i)(2)) with respect to the Previous General Partner;
(6) to modify the manner in which Capital Accounts are computed (but
only to the extent set forth in the definition of "Capital Account" or
contemplated by the Code or the Regulations); and
(7) the issuance of additional Partnership Interests in accordance
with Section 4.2.
The General Partner will provide notice to the Limited Partners when any action
under this Section 7.3.C is taken.
D. Notwithstanding Sections 7.3.B and 7.3.C hereof, this Agreement shall
not be amended, and no action may be taken by the General Partner, without the
Consent of each Partner adversely affected, if such amendment or action would
(i) convert a Limited Partner Interest in the Partnership into a General Partner
Interest (except as a result of the General Partner acquiring such Partnership
Interest), (ii) modify the limited liability of a Limited Partner, (iii) alter
the rights of any Partner to receive the distributions to which such Partner is
entitled, pursuant to Article 5 or Section 13.2.A(4) hereof, or alter the
allocations specified in
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Article 6 hereof (except, in any case, as permitted pursuant to Sections 4.2 and
7.3.C hereof), (iv) alter or modify the Redemption rights, Cash Amount or REIT
Shares Amount as set forth in Sections 8.6 and 11.2 hereof, or amend or modify
any related definitions, or (v) amend this Section 7.3.D; provided, however,
that the Consent of each Partner adversely affected shall not be required for
any amendment or action that affects all Partners holding the same class or
series of Partnership Units on a uniform or pro rata basis. Further, no
amendment may alter the restrictions on the General Partner's authority set
forth elsewhere in this Section 7.3 without the Consent specified therein. Any
such amendment or action consented to by any Partner shall be effective as to
that Partner, notwithstanding the absence of such consent by any other Partner.
Section 7.4 Reimbursement of the General Partner.
A. The General Partner shall not be compensated for its services as general
partner of the Partnership except as provided in elsewhere in this Agreement
(including the provisions of Articles 5 and 6 hereof regarding distributions,
payments and allocations to which it may be entitled in its capacity as the
General Partner).
B. Subject to Sections 7.4.C and 15.11 hereof, the Partnership shall be
liable for, and shall reimburse the General Partner on a monthly basis, or such
other basis as the General Partner may determine in its sole and absolute
discretion, for all sums expended in connection with the Partnership's business,
including, without limitation, (i) expenses relating to the ownership of
interests in and management and operation of, or for the benefit of, the
Partnership, (ii) compensation of officers and employees, including, without
limitation, payments under future compensation plans of the General Partner that
may provide for stock units, or other phantom stock, pursuant to which employees
of the General Partner will receive payments based upon dividends on or the
value of REIT Shares, (iii) director fees and expenses and (iv) all costs and
expenses of the General Partner being a public company, including costs of
filings with the SEC, reports and other distributions to its shareholders;
provided, however, that the amount of any reimbursement shall be reduced by any
interest earned by the General Partner with respect to bank accounts or other
instruments or accounts held by it on behalf of the Partnership as permitted
pursuant to Section 7.5 hereof. Such reimbursements shall be in addition to any
reimbursement of the General Partner as a result of indemnification pursuant to
Section 7.7 hereof.
C. To the extent practicable, Partnership expenses shall be billed directly
to and paid by the Partnership and, subject to Section 15.11 hereof,
reimbursements to the General Partner or any of its Affiliates by the
Partnership pursuant to this Section 7.4 shall be treated as "guaranteed
payments" within the meaning of Code Section 707(c).
Section 7.5 Outside Activities of the Previous General Partner and the
General Partner. Neither the General Partner nor the Previous General Partner
shall directly or indirectly enter into or conduct any business, other than in
connection with (a) the ownership, acquisition and disposition of Partnership
Interests as General Partner, (b) the management of the business of the
Partnership, (c) the operation of the Previous General Partner as a reporting
company with a class (or classes) of securities registered under the Exchange
Act, (d) the Previous General Partner's operations as a REIT, (e) the offering,
sale, syndication, private placement or public offering of stock, bonds,
securities or other interests, (f) financing or refinancing of any type related
to the Partnership or its assets or activities, (g) the General Partner's
qualification as a "qualified REIT subsidiary" (within the meaning of Code
Section 856(i)(2)) and (h) such activities as are incidental thereto. Nothing
contained herein shall be deemed to prohibit the General Partner or the Previous
General Partner from executing guarantees of Partnership debt for which it would
otherwise be liable in its capacity as General Partner. Subject to Section 7.3.B
hereof, the General Partner, the Previous General Partner, the Special Limited
Partner and all "qualified REIT subsidiaries" (within the meaning of Code
Section 856(i)(2)), taken as a group, shall not own any assets or take title to
assets (other than temporarily in connection with an acquisition prior to
contributing such assets to the Partnership) other than Partnership Interests as
the General Partner or Special Limited Partner and other than such cash and cash
equivalents, bank accounts or similar instruments or accounts as such group
deems reasonably necessary, taking into account Section 7.1.D hereof and the
requirements necessary for the Previous General Partner to qualify as a REIT and
for the Previous General Partner, the General Partner and the Special Limited
Partner to carry out
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their respective responsibilities contemplated under this Agreement and the
Charter. Notwithstanding the foregoing, if the Previous General Partner or the
General Partner acquires assets in its own name and owns Property other than
through the Partnership, the Partners agree to negotiate in good faith to amend
this Agreement, including, without limitation, the definition of "Adjustment
Factor," to reflect such activities and the direct ownership of assets by the
Previous General Partner or the General Partner. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
Section 7.6 Contracts with Affiliates.
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment, and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.5 hereof and subject to Section 3.1
hereof, the Partnership may transfer assets to joint ventures, limited liability
companies, partnerships, corporations, business trusts or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions consistent with this Agreement and applicable law as
the General Partner, in its sole and absolute discretion, believes to be
advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property to
the Partnership, directly or indirectly, except pursuant to transactions that
are determined by the General Partner in good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and without the
approval of the Limited Partners, may propose and adopt on behalf of the
Partnership employee benefit plans funded by the Partnership for the benefit of
employees of the General Partner, the Partnership, Subsidiaries of the
Partnership or any Affiliate of any of them in respect of services performed,
directly or indirectly, for the benefit of the Partnership or any of the
Partnership's Subsidiaries.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
Section 7.7 Indemnification.
A. To the fullest extent permitted by applicable law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
attorney's fees and other legal fees and expenses), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, that
relate to the operations of the Partnership ("Actions") as set forth in this
Agreement in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise; provided, however, that the Partnership shall
not indemnify an Indemnitee (i) for willful misconduct or a knowing violation of
the law or (ii) for any transaction for which such Indemnitee received an
improper personal benefit in violation or breach of any provision of this
Agreement. Without limitation, the foregoing indemnity shall extend to any
liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any
indebtedness of the Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness which the Partnership or any Subsidiary of
the Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into one
or more indemnity agreements consistent with the provisions of this Section 7.7
in favor of any Indemnitee having or potentially having liability for any such
indebtedness. It is the intention of this Section 7.7.A that the Partnership
indemnify each Indemnitee to the fullest extent permitted by law. The
termination of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct
set forth in this Section 7.7.A. The termination of any proceeding by conviction
of an Indemnitee or upon a plea of nolo contendere or its equivalent by an
Indemnitee, or an entry of an order of
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probation against an Indemnitee prior to judgment, does not create a presumption
that such Indemnitee acted in a manner contrary to that specified in this
Section 7.7.A with respect to the subject matter of such proceeding. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership or otherwise provide funds to enable the Partnership to fund its
obligations under this Section 7.7.
B. To the fullest extent permitted by law, expenses incurred by an
Indemnitee who is a party to a proceeding or otherwise subject to or the focus
of or is involved in any Action shall be paid or reimbursed by the Partnership
as incurred by the Indemnitee in advance of the final disposition of the Action
upon receipt by the Partnership of (i) a written affirmation by the Indemnitee
of the Indemnitee's good faith belief that the standard of conduct necessary for
indemnification by the Partnership as authorized in this Section 7.7.A has been
met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay
the amount if it shall ultimately be determined that the standard of conduct has
not been met.
C. The indemnification provided by this Section 7.7 shall be in addition to
any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors, assigns
and administrators of the Indemnitee unless otherwise provided in a written
agreement with such Indemnitee or in the writing pursuant to which such
Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of any of the Indemnitees and such other Persons
as the General Partner shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in connection
with the Partnership's activities, regardless of whether the Partnership would
have the power to indemnify such Person against such liability under the
provisions of this Agreement.
E. Any liabilities which an Indemnitee incurs as a result of acting on
behalf of the Partnership or the General Partner (whether as a fiduciary or
otherwise) in connection with the operation, administration or maintenance of an
employee benefit plan or any related trust or funding mechanism (whether such
liabilities are in the form of excise taxes assessed by the IRS, penalties
assessed by the Department of Labor, restitutions to such a plan or trust or
other funding mechanism or to a participant or beneficiary of such plan, trust
or other funding mechanism, or otherwise) shall be treated as liabilities or
judgments or fines under this Section 7.7, unless such liabilities arise as a
result of (i) such Indemnitee's intentional misconduct or knowing violation of
the law, or (ii) any transaction in which such Indemnitee received a personal
benefit in violation or breach of any provision of this Agreement or applicable
law.
F. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
I. It is the intent of the Partners that any amounts paid by the
Partnership to the General Partner pursuant to this Section 7.7 shall be treated
as "guaranteed payments" within the meaning of Code Section 707(c).
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Section 7.8 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this Agreement,
neither the General Partner nor any of its directors or officers shall be liable
or accountable in damages or otherwise to the Partnership, any Partners or any
Assignees for losses sustained, liabilities incurred or benefits not derived as
a result of errors in judgment or mistakes of fact or law or of any act or
omission if the General Partner or such director or officer acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner is
acting for the benefit of the Partnership, the Limited Partners and the General
Partner's shareholders collectively and that the General Partner is under no
obligation to give priority to the separate interests of the Limited Partners or
the General Partner's shareholders (including, without limitation, the tax
consequences to Limited Partners, Assignees or the General Partner's
shareholders) in deciding whether cause the Partnership to take (or decline to
take) any actions.
C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its employees or agents (subject to the
supervision and control of the General Partner). The General Partner shall not
be responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's, and its officers' and directors',
liability to the Partnership and the Limited Partners under this Section 7.8 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
E. Notwithstanding anything herein to the contrary, except for fraud,
willful misconduct or gross negligence, or pursuant to any express indemnities
given to the Partnership by any Partner pursuant to any other written
instrument, no Partner shall have any personal liability whatsoever, to the
Partnership or to the other Partner(s), for the debts or liabilities of the
Partnership or the Partnership's obligations hereunder, and the full recourse of
the other Partner(s) shall be limited interest of that Partner in the
Partnership. To the fullest extent permitted by law, no officer, director or
shareholder of the General Partner shall be liable to the Partnership for money
damages except for (i) active and deliberate dishonesty established by a non-
appealable final judgment or (ii) actual receipt of an improper benefit or
profit in money, property or services. Without limitation of the foregoing, and
except for fraud, willful misconduct or gross negligence, or pursuant to any
such express indemnity, no property or assets of any Partner, other than its
interest in the Partnership, shall be subject to levy, execution or other
enforcement procedures for the satisfaction of any judgment (or other judicial
process) in favor of any other Partner(s) and arising out of, or in connection
with, this Agreement. This Agreement is executed by the officers of the General
Partner solely as officers of the same and not in their own individual
capacities.
F. To the extent that, at law or in equity, the General Partner has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or the Limited Partners, the General Partner shall not be liable to the
Partnership or to any other Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of the General Partner otherwise
existing at law or in equity, are agreed by the Partners to replace such other
duties and liabilities of such General Partner.
Section 7.9 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it in good faith to be genuine and to have been signed
or presented by the proper party or parties.
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B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters that the General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty that
is permitted or required to be done by the General Partner hereunder.
D. Notwithstanding any other provision of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Previous General Partner to
continue to qualify as a REIT, (ii) for the Previous General Partner otherwise
to satisfy the REIT Requirements, (iii) to avoid the Previous General Partner
incurring any taxes under Code Section 857 or Code Section 4981 or (iv) for the
General Partner or the Special Limited Partner to continue to qualify as a
"qualified REIT subsidiary" (within the meaning of Code Section 856(i)(2)), is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
Section 7.10 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively with other Partners or Persons, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be held by the General Partner for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority,
without the consent or approval of any other Partner or Person, to encumber,
sell or otherwise use in any manner any and all assets of the Partnership and to
enter into any contracts on behalf of the Partnership, and take any and all
actions on behalf of the Partnership, and such Person shall be entitled to deal
with the General Partner as if it were the Partnership's sole party in interest,
both legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner in connection with any
such dealing. In no event shall any Person dealing with the General Partner or
its representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expediency of any
act or action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
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ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this Agreement
(including, without limitation, Section 10.4 hereof) or under the Act.
Section 8.2 Management of Business. No Limited Partner or Assignee (other
than the General Partner, any of its Affiliates or any officer, director,
member, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such) shall take
part in the operations, management or control (within the meaning of the Act) of
the Partnership's business, transact any business in the Partnership's name or
have the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, member, employee, partner, agent, representative, or
trustee of the General Partner, the Partnership or any of their Affiliates, in
their capacity as such, shall not affect, impair or eliminate the limitations on
the liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners. Subject to any
agreements entered into pursuant to Section 7.6.D hereof and any other
agreements entered into by a Limited Partner or its Affiliates with the General
Partner, the Partnership or a Subsidiary (including, without limitation, any
employment agreement), any Limited Partner and any Assignee, officer, director,
employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall
be entitled to and may have business interests and engage in business activities
in addition to those relating to the Partnership, including business interests
and activities that are in direct or indirect competition with the Partnership
or that are enhanced by the activities of the Partnership. Neither the
Partnership nor any Partners shall have any rights by virtue of this Agreement
in any business ventures of any Limited Partner or Assignee. Subject to such
agreements, none of the Limited Partners nor any other Person shall have any
rights by virtue of this Agreement or the partnership relationship established
hereby in any business ventures of any other Person (other than the General
Partner, to the extent expressly provided herein), and such Person shall have no
obligation pursuant to this Agreement, subject to Section 7.6.D hereof and any
other agreements entered into by a Limited Partner or its Affiliates with the
General Partner, the Partnership or a Subsidiary, to offer any interest in any
such business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character that, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
Section 8.4 Return of Capital. Except pursuant to the rights of
Redemption set forth in Section 8.6 hereof, no Limited Partner shall be entitled
to the withdrawal or return of its Capital Contribution, except to the extent of
distributions made pursuant to this Agreement or upon termination of the
Partnership as provided herein. Except to the extent provided in Article 6
hereof or otherwise expressly provided in this Agreement, no Limited Partner or
Assignee shall have priority over any other Limited Partner or Assignee either
as to the return of Capital Contributions or as to profits, losses or
distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
A. In addition to other rights provided by this Agreement or by the Act,
and except as limited by Section 8.5.C hereof, each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon written demand with a statement of
the purpose of such demand and at such Limited Partner's own expense:
(1) to obtain a copy of (i) the most recent annual and quarterly
reports filed with the SEC by the Previous General Partner or the General
Partner pursuant to the Exchange Act and (ii) each report or other written
communication sent to the shareholders of the Previous General Partner;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
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(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all amendments
thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and that each Partner has agreed to contribute
in the future, and the date on which each became a Partner.
B. The Partnership shall notify any Limited Partner that is a Qualifying
Party, on request, of the then current Adjustment Factor or any change made to
the Adjustment Factor.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner believes to be in the
nature of trade secrets or other information the disclosure of which the General
Partner in good faith believes is not in the best interests of the Partnership
or the General Partner or (ii) the Partnership or the General Partner is
required by law or by agreements with unaffiliated third parties to keep
confidential.
Section 8.6 Redemption Rights of Qualifying Parties.
A. After the first Twelve-Month Period, a Qualifying Party, but no other
Limited Partner or Assignee, shall have the right (subject to the terms and
conditions set forth herein) to require the Partnership to redeem all or a
portion of the Redeemable Units held by such Tendering Party (such Redeemable
Units being hereafter "Tendered Units") in exchange (a "Redemption") for REIT
shares issuable on, or the Cash Amount payable on, the Specified Redemption
Date, as determined by the Partnership in its sole discretion. Any Redemption
shall be exercised pursuant to a Notice of Redemption delivered to the General
Partner by the Qualifying Party when exercising the Redemption right (the
"Tendering Party"). A Tendering Party shall have no right to receive
distributions with respect to any Tendered Units (other than the Cash Amount)
paid after delivery of the Notice of Redemption, whether or not the Partnership
Record Date for such distribution precedes or coincides with such delivery of
the Notice of Redemption. If the Partnership elects to redeem Tendered Units for
cash, the Cash Amount shall be delivered as a certified check payable to the
Tendering Party or, in the General Partner's sole and absolute discretion, in
immediately available funds.
B. If the Partnership elects to redeem Tendered Units for REIT Shares
rather than cash, then the Partnership shall direct the Previous General Partner
to issue and deliver such REIT Shares to the Tendering Party pursuant to the
terms set forth in this Section 8.6.B, in which case, (i) the Previous General
Partner, acting as a distinct legal entity, shall assume directly the obligation
with respect thereto and shall satisfy the Tendering Party's exercise of its
Redemption right, and (ii) such transaction shall be treated, for federal income
tax purposes, as a transfer by the Tendering Party of such Tendered Units to the
Previous General Partner in exchange for REIT shares. The percentage of the
Tendered Units tendered for Redemption by the Tendering Party for which the
Partnership elects to cause the Previous General Partner to issue REIT Shares
(rather than cash) is referred to as the "Applicable Percentage." In making such
election to cause the Previous General Partner to acquire Tendered Units, the
Partnership shall act in a fair, equitable and reasonable manner that neither
prefers one group or class of Qualifying Parties over another nor discriminates
against a group or class of Qualifying Parties. If the Partnership elects to
redeem any number of Tendered Units for REIT Shares, rather than cash, on the
Specified Redemption Date, the Tendering Party shall sell such number of the
Tendered Units to the Previous General Partner in exchange for a number of REIT
Shares equal to the product of the REIT Shares Amount and the Applicable
Percentage. The Tendering Party shall submit (i) such information, certification
or affidavit as the Previous General Partner may reasonably require in
connection with the application of the Ownership Limit and other restrictions
and limitations of the Charter to any such acquisition and (ii) such written
representations, investment letters, legal opinions or other instruments
necessary, in the Previous General Partner's view, to effect compliance with the
Securities Act. The product of the Applicable Percentage and the REIT Shares
Amount, if applicable, shall be delivered by the Previous General Partner as
duly authorized, validly issued, fully paid and accessible REIT Shares and, if
applicable, Rights, free of any pledge, lien, encumbrance or restriction, other
than the Ownership Limit and
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other restrictions provided in the Charter, the Bylaws of the Previous General
Partner, the Securities Act and relevant state securities or "blue sky" laws.
Neither any Tendering Party whose Tendered Units are acquired by the Previous
General Partner pursuant to this Section 8.6.B, any Partner, any Assignee nor
any other interested Person shall have any right to require or cause the
Previous General Partner or the General Partner to register, qualify or list any
REIT Shares owned or held by such Person, whether or not such REIT Shares are
issued pursuant to this Section 8.6.B, with the SEC, with any state securities
commissioner, department or agency, under the Securities Act or the Exchange Act
or with any stock exchange; provided, however, that this limitation shall not be
in derogation of any registration or similar rights granted pursuant to any
other written agreement between the Previous General Partner and any such
Person. Notwithstanding any delay in such delivery, the Tendering Party shall be
deemed the owner of such REIT Shares and Rights for all purposes, including,
without limitation, rights to vote or consent, receive dividends, and exercise
rights, as of the Specified Redemption Date. REIT Shares issued upon an
acquisition of the Tendered Units by the Previous General Partner pursuant to
this Section 8.6.B may contain such legends regarding restrictions under the
Securities Act and applicable state securities laws as the Previous General
Partner in good faith determines to be necessary or advisable in order to ensure
compliance with such laws.
C. Notwithstanding the provisions of Section 8.6.A and 8.6.B hereof, the
Tendering Parties (i) where the Redemption would consist of less than all the
Partnership Common Units held by Partners other than the General Partner and the
Special Limited Partner, shall not be entitled to elect or effect a Redemption
to the extent that the aggregate Percentage Interests of the Limited Partners
(other than the Special Limited Partner) would be reduced, as a result of the
Redemption, to less that percent (1%) and (ii) shall have no rights under this
Agreement that would otherwise be prohibited under the Charter. To the extent
that any attempted Redemption would be in violation of this Section 8.6.C, it
shall be null and void ab initio, and the Tendering Party shall not acquire any
rights or economic interests in REIT Shares otherwise issuable by the Previous
General Partner under Section 8.6.B hereof.
D. In the event that the Partnership declines to cause the Previous General
Partner to acquire all of the Tendered Units from the Tendering Party in
exchange for REIT Shares pursuant to Section 8.6.B hereof following receipt of a
Notice of Redemption (a "Declination"):
(1) The Previous General Partner or the General Partner shall give
notice of such Declination to the Tendering Party on or before the close of
business on the Cut-Off Date.
(2) The Partnership may elect to raise funds for the payment of the
Cash Amount either (a) by requiring that the General Partner contribute
such funds from the proceeds of a registered public offering (a "Public
Offering Funding") by the Previous General Partner of a number of REIT
Shares ("Registrable Shares") equal to the REIT Shares Amount with respect
to the Tendered Units or (b) from any other sources (including, but not
limited to, the sale of any Property and the incurrence of additional Debt)
available to the Partnership.
(3) Promptly upon the General Partner's receipt of the Notice of
Redemption and the Previous General Partner or the General Partner giving
notice of the Partnership's Declination, the General Partner shall give
notice (a "Single Funding Notice") to all Qualifying Parties then holding a
Partnership Interest (or an interest therein) and having Redemption rights
pursuant to this Section 8.6 and require that all such Qualifying Parties
elect whether or not to effect a Redemption of their Partnership Common
Units to be funded through such Public Offering Funding. In the event that
any such Qualifying Party elects to effect such a Redemption, it shall give
notice thereof and of the number of Partnership Common Units to be made
subject thereon in writing to the General Partner within ten (10) Business
Days after receipt of the Single Funding Notice, and such Qualifying Party
shall be treated as a Tendering Party for all purposes of this Section 8.6.
In the event that a Qualifying Party does not so elect, it shall be deemed
to have waived its right to effect a Redemption for the current
Twelve-Month Period; provided, however, that the Previous General Partner
shall not be required to acquire Partnership Common Units pursuant to this
Section 8.6.D more than twice within a Twelve-Month Period.
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Any proceeds from a Public Offering Funding that are in excess of the Cash
Amount shall be for the sole benefit of the Previous General Partner and/or the
General Partner. The General Partner and/or the Special Limited Partner shall
make a Capital Contribution of such amounts to the Partnership for an additional
General Partner Interest and/or Limited Partner Interest. Any such contribution
shall entitle the General Partner and the Special Limited Partner, as the case
may be, to an equitable Percentage Interest adjustment.
E. Notwithstanding the provisions of Section 8.6.B hereof, the Previous
General Partner shall not, under any circumstances, elect to acquire Tendered
Units in exchange for the REIT Shares Amount if such exchange would be
prohibited under the Charter.
F. Notwithstanding anything herein to the contrary (but subject to Section
8.6.C hereof), with respect to any Redemption pursuant to this Section 8.6:
(1) All Partnership Common Units acquired by the Previous General
Partner pursuant to Section 8.6.B hereof shall be contributed by the
Previous General Partner to either or both of the General Partner and the
Special Limited Partner in such proportions as the Previous General
Partner, the General Partner and the Special Limited Partner shall
determine. Any Partnership Common Units so contributed to the General
Partner shall automatically, and without further action required, be
converted into and deemed to be a General Partner Interest comprised of the
same number of Partnership Common Units. Any Partnership Common Units so
contributed to the Special Limited Partner shall remain outstanding.
(2) Subject to the Ownership Limit, no Tendering Party may effect a
Redemption for less than five hundred (500) Redeemable Units or, if such
Tendering Party holds (as a Limited Partner or, economically, as an
Assignee) less than five hundred (500) Redeemable Units, all of the
Redeemable Units held by such Tendering Party.
(3) Each Tendering Party (a) may effect a Redemption only once in each
fiscal quarter of a Twelve-Month Period and (b) may not effect a Redemption
during the period after the Partnership Record Date with respect to a
distribution and before the record date established by the Previous General
Partner for a distribution to its shareholders of some or all of its
portion of such Partnership distribution.
(4) Notwithstanding anything herein to the contrary, with respect to
any Redemption or acquisition of Tendered Units by the Previous General
Partner pursuant to Section 8.6.B hereof, in the event that the Previous
General Partner or the General Partner gives notice to all Limited Partners
(but excluding any Assignees) then owning Partnership Interests (a "Primary
Offering Notice") that the Previous General Partner desires to effect a
primary offering of its equity securities then, unless the Previous General
Partner and the General Partner otherwise consent, commencement of the
actions denoted in Section 8.6.E hereof as to a Public Offering Funding
with respect to any Notice of Redemption thereafter received, whether or
not the Tendering Party is a Limited Partner, may be delayed until the
earlier of (a) the completion of the primary offering or (b) ninety (90)
days following the giving of the Primary Offering Notice.
(5) Without the Consent of the Previous General Partner, no Tendering
Party may effect a Redemption within ninety (90) days following the closing
of any prior Public Offering Funding.
(6) The consummation of such Redemption shall be subject to the
expiration or termination of the applicable waiting period, if any, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(7) The Tendering Party shall continue to own (subject, in the case of
an Assignee, to the provision of Section 11.5 hereof) all Redeemable Units
subject to any Redemption, and be treated as a Limited Partner or an
Assignee, as applicable, with respect to such Redeemable Units for all
purposes of this Agreement, until such Redeemable Units are either paid for
by the Partnership pursuant to Section 8.6.A hereof or transferred to the
Previous General Partner (or directly to the General Partner or Special
Limited Partner) and paid for, by the issuance of the REIT Shares, pursuant
to Section 8.6.B hereof on the Specified Redemption Date. Until a Specified
Redemption Date and an acquisition of the Tendered Units by the Previous
General Partner pursuant to Section 8.6.B hereof, the Tendering Party shall
have
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no rights as a shareholder of the Previous General Partner with respect to
the REIT Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this
Section 8.6.F, all Partnership Common Units beneficially owned by a Related
Party of a Tendering Party shall be considered to be owned or held by such
Tendering Party.
G. In connection with an exercise of Redemption rights pursuant to this
Section 8.6, the Tendering Party shall submit the following to the General
Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as the Notice of
Redemption, (a) disclosing the actual and constructive ownership, as
determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT
Shares by (i) such Tendering Party and (ii) any Related Party and (b)
representing that, after giving effect to the Redemption, neither the
Tendering Party nor any Related Party will own REIT Shares in excess of the
Ownership Limit;
(2) A written representation that neither the Tendering Party nor any
Related Party has any intention to acquire any additional REIT Shares prior
to the closing of the Redemption on the Specified Redemption Date; and
(3) An undertaking to certify, at and as a condition to the closing of
the Redemption on the Specified Redemption Date, that either (a) the actual
and constructive ownership of REIT Shares by the Tendering Party and any
Related Party remain unchanged from that disclosed in the affidavit
required by Section 8.6.G(1) or (b) after giving effect to the Redemption,
neither the Tendering Party nor any Related Party shall own REIT Shares in
violation of the Ownership Limit.
Section 8.7 Partnership Right to Call Limited Partner
Interests. Notwithstanding any other provision of this Agreement, on and after
the date on which the aggregate Percentage Interests of the Limited Partners
(other than the Special Limited Partner) are less than one percent (1%), the
Partnership shall have the right, but not the obligation, from time to time and
at any time to redeem any and all outstanding Limited Partner Interests (other
than the Special Limited Partner's Limited Partner Interest) by treating any
Limited Partner as a Tendering Party who has delivered a Notice of Redemption
pursuant to Section 8.6 hereof for the amount of Partnership Common Units to be
specified by the General Partner, in its sole and absolute discretion, by notice
to such Limited Partner that the Partnership has elected to exercise its rights
under this Section 8.7. Such notice given by the General Partner to a Limited
Partner pursuant to this Section 8.7 shall be treated as if it were a Notice of
Redemption delivered to the General Partner by such Limited Partner. For
purposes of this Section 8.7, (a) any Limited Partner (whether or not otherwise
a Qualifying Party) may, in the General Partner's sole and absolute discretion,
be treated as a Qualifying Party that is a Tendering Party and (b) the
provisions of Sections 8.6.C(1), 8.6.F(2), 8.6.F(3) and 8.6.F(5) hereof shall
not apply, but the remainder of Section 8.6 hereof shall apply, mutatis
mutandis.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting.
A. The General Partner shall keep or cause to be kept at the principal
office of the Partnership those records and documents required to be maintained
by the Act and other books and records deemed by the General Partner to be
appropriate with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 8.5.A or Section 9. hereof. Any records maintained by or on behalf of
the Partnership in the regular course of its business may be kept on, or be in
the form for, punch cards, magnetic tape, photographs, micrographics or any
other information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time.
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B. The books of the Partnership shall be maintained, for financial and tax
reporting purposes, on an accrual basis in accordance with generally accepted
accounting principles, or on such other basis as the General Partner determines
to be necessary or appropriate. To the extent permitted by sound accounting
practices and principles, the Partnership, the General Partner and the Previous
General Partner may operate with integrated or consolidated accounting records,
operations and principles.
Section 9.2 Fiscal Year. The Fiscal Year of the Partnership shall be the
calendar year.
Section 9.3 Reports.
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Fiscal Year, the General Partner shall cause
to be mailed to each Limited Partner, of record as of the close of the Fiscal
Year, an annual report containing financial statements of the Partnership, or of
the Previous General Partner if such statements are prepared solely on a
consolidated basis with the Previous General Partner, for such Fiscal Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent public
accountants selected by the General Partner.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner, of record as of the last day of the calendar quarter, a report
containing unaudited financial statements of the Partnership, or of the Previous
General Partner if such statements are prepared solely on a consolidated basis
with the Previous General Partner, and such other information as may be required
by applicable law or regulation or as the General Partner determines to be
appropriate. At the request of any Limited Partner, the General Partner shall
provide access to the books, records and workpapers upon which the reports
required by this Section 9.3 are based, to the extent required by the Act.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns. The General Partner shall arrange
for the preparation and timely filing of all returns with respect to Partnership
income, gains, deductions, losses and other items required of the Partnership
for federal and state income tax purposes and shall use all reasonable effort to
furnish, within ninety (90) days of the close of each taxable year, the tax
information reasonably required by Limited Partners for federal and state income
tax reporting purpose The Limited Partners shall promptly provide the General
Partner with such information relating to the Contributed Properties, including
tax basis and other relevant information, as may be reasonably requested by the
General Partner from time to time.
Section 10.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code, including, but not limited to,
the election under Code Section 754 and the election to use the "recurring item"
method of accounting provided under Code Section 461(h) with respect to property
taxes imposed on the Partnership's Properties; provided, however, that, if the
"recurring item" method of accounting is elected with respect to such property
taxes, the Partnership shall pay the applicable property taxes prior to the date
provided in Code Section 461(h) for purposes of determining economic
performance. The General Partner shall have the right to seek to revoke any such
election (including, without limitation, any election under Code Sections 461(h)
and 754) upon the General Partner's determination in its sole and absolute
discretion that such revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner.
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. The tax matters partner shall
receive no compensation for its services. All third-party costs and expenses
incurred by the tax matters partner in performing its duties as such (including
legal and accounting fees and expenses) shall be borne by the Partnership in
addition to any reimbursement pursuant to Section 7.4 hereof. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
to assist
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the tax matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable. At the
request of any Limited Partner, the General Partner agrees to consult with such
Limited Partner with respect to the preparation and filing of any returns and
with respect to any subsequent audit or litigation relating to such returns;
provided, however, that the filing of such returns shall be in the sole and
absolute discretion of the General Partner.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of Partnership
items required to be taken into account by a Partner for income tax
purposes (such administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters partner may
expressly state that such agreement shall bind all Partners, except such
settlement agreement shall not bind any Partner (i) who (within the time
prescribed pursuant to the Code and Regulations) files a statement with the
IRS providing that the tax matters partner shall not have the authority to
enter into a settlement agreement on behalf of such Partner or (ii) who is
a "notice partner" (as defined in Code Section 6231) or a member of a
"notice group" (as defined in Code Section 6223(b)(2));
(2) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the United States
Tax Court or the United States Claims Court, or the filing of a complaint
for refund with the District Court of the United States the district in
which the Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS at
any time and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition or complaint) for judicial review
with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax that is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such
item; and
(6) to take any other action on behalf of the Partners in connection
with any tax audit or judicial review proceeding to the extent permitted by
applicable law or regulations.
The taking of any action and the incurring of any expense by the tax matters
partner in connection with any such proceeding, except to the extent required by
law, is a matter in the sole and absolute discretion of the tax matters partner
and the provisions relating to indemnification of the General Partner set forth
in Section 7.7 hereof shall be fully applicable to the tax matters partner in
its capacity as such.
Section 10.4 Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from or pay on behalf of or with respect to such Limited
Partner any amount of federal, state, local or foreign taxes that the General
Partner determines that the Partnership is required to withhold or pay with
respect to any amount distributable or allocable to such Limited Partner
pursuant to this Agreement, including, without limitation, any taxes required to
be withheld or paid by the Partners pursuant to Code Section 1441, Code Section
1442, Code Section 1445 or Code Section 1446. Any amount paid on behalf of or
with respect to a Limited Partner shall constitute a loan by the Partnership to
such Limited Partner, which loan shall be repaid by such Limited Partner within
fifteen (15) days after notice from the General Partner that such payment must
be made unless (i) the Partnership withholds such payment from a distribution
that would otherwise be made to the Limited Partner or (ii) the General Partner
determines, in its sole and absolute discretion, that such payment may be
satisfied out of the Available Funds of the Partnership that would, but for such
payment, be distributed to the Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such
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Limited Partner's obligation to pay to the Partnership any amounts required to
be paid pursuant to this Section 10.4. In the event that a Limited Partner fails
to pay any amounts owed to the Partnership pursuant to this Section 10.4 when
due, the General Partner may, in its sole and absolute discretion, elect to make
the payment to the Partnership on behalf of such defaulting Limited Partner, and
in such event shall be deemed to have loaned such amount to such defaulting
Limited Partner and shall succeed to all rights and remedies of the Partnership
as against such defaulting Limited Partner (including, without limitation, the
right to receive distributions). Any amounts payable by a Limited Partner
hereunder shall bear interest at the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points (but not higher than
the maximum lawful rate) from the date such amount is due (i.e., fifteen (15)
days after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer.
A. No part of the interest of a Partner shall be subject to the claims of
any creditor, to any spouse for alimony or support, or to legal process, and may
not be voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any Transfer or purported Transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void ab initio.
C. Notwithstanding the other provisions of this Article 11 (other than
Section 11.6.D hereof), the Partnership Interests of the General Partner and the
Special Limited Partner may be Transferred, in whole or in part, at any time or
from time to time, to or among the Previous General Partner, the General
Partner, the Special Limited Partner, and any other Person that is, at the time
of such Transfer, a "qualified REIT subsidiary" (within the meaning of Code
Section 856(i)(2)) with respect to the Previous General Partner. Any transferee
of the entire General Partner Interest pursuant to this Section 11.1.C shall
automatically become, without further action or Consent of any Limited Partners,
the sole general partner of the Partnership, subject to all the rights,
privileges, duties and obligations under this Agreement and the Act relating to
a general partner. Any transferee of a Limited Partner Interest pursuant to this
Section 11.1.C shall automatically become, without further action or Consent of
any Limited Partners, a Substituted Limited Partner. Upon any Transfer permitted
by this Section 11.1.C, the transferor Partner shall be relieved of all its
obligations under this Agreement. The provisions of Section 11.2.B (other than
the last sentence thereof), 11.3, 11.4.A and 11.5 hereof shall not apply to any
Transfer permitted by this Section 11.1.C.
Section 11.2 Transfer of General Partner's Partnership Interest.
A. The General Partner may not Transfer any of its General Partner Interest
or withdraw from the Partnership except as provided in Sections 11.2.B and
11.2.C hereof.
B. The General Partner shall not withdraw from the Partnership and shall
not Transfer all or any portion of its interest in the Partnership (whether by
sale, disposition, statutory merger or consolidation, liquidation or otherwise)
without the Consent of the Limited Partners, which Consent may be given or
withheld in the sole and absolute discretion of the Limited Partners. Upon any
Transfer of such a Partnership Interest pursuant to the Consent of the Limited
Partners and otherwise in accordance with the provisions of this Section 11.2.B,
the transferee shall become a successor General Partner for all purposes herein,
and shall be vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for all duties
of the General Partner, once such transferee has executed such instruments as
may be necessary to effectuate such admission and to confirm the agreement of
such transferee to be bound by all the terms and provisions of this Agreement
with respect to the Partnership Interest so acquired. It is a condition to any
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Transfer otherwise permitted hereunder that the transferee assumes, by operation
of law or express agreement, all of the obligations of the transferor General
Partner under this Agreement with respect to such Transferred Partnership
Interest, and such Transfer shall relieve the transferor General Partner of its
obligations under this Agreement without the Consent of the Limited Partners. In
the event that the General Partner withdraws from the Partnership, in violation
of this Agreement or otherwise, or otherwise dissolves or terminates, or upon
the bankruptcy of the General Partner, a Majority in Interest of the Limited
Partners may elect to continue the Partnership business by selecting a successor
General Partner in accordance with the Act.
C. The General Partner may merge with another entity if immediately after
such merger substantially all of the assets of the surviving entity, other than
the General Partner Interest held by the General Partner, are contributed to the
Partnership as a Capital Contribution in exchange for Partnership Units.
Section 11.3 Limited Partners' Rights to Transfer.
A. General. Prior to the end of the first Twelve-Month Period, no Limited
Partner shall Transfer all or any portion of its Partnership Interest to any
transferee without the Consent of the General Partner, which Consent may be
withheld in its sole and absolute discretion; provided, however, that any
Limited Partner may, at any time, without the consent of the General Partner,
(i) Transfer all or part of its Partnership Interest to any Designated Party,
any Family Member, any Controlled Entity or any Affiliate, provided that the
transferee is, in any such case, a Qualified Transferee, or (ii) pledge (a
"Pledge") all or any portion of its Partnership Interest to a lending
institution, that is not an Affiliate of such Limited Partner, as collateral or
security for a bona fide loan or other extension of credit, and Transfer such
pledged Partnership Interest to such lending institution in connection with the
exercise of remedies under such loan or extension or credit (any Transfer or
Pledge permitted by this proviso is hereinafter referred to as a "Permitted
Transfer"). After such first Twelve-Month Period, each Limited Partner, and each
transferee of Partnership Units or Assignee pursuant to a Permitted Transfer,
shall have the right to Transfer all or any portion of its Partnership Interest
to any Person, subject to the provisions of Section 11.6 hereof and to
satisfaction of each of the following conditions:
(1) General Partner Right of First Refusal. The transferring Partner
shall give written notice of the proposed Transfer to the General Partner,
which notice shall state (i) the identity of the proposed transferee and
(ii) the amount and type of consideration proposed to be received for the
Transferred Partnership Units. The General Partner shall have ten (10)
Business Days upon which to give the Transferring Partner notice of its
election to acquire the Partnership Units on the proposed terms. If it so
elects, it shall purchase the Partnership Units on such terms within ten
(10) Business Days after giving notice of such election; provided, however,
that in the event that the proposed terms involve a purchase for cash, the
General Partner may at its election deliver in lieu of all or any portion
of such cash a note payable to the Transferring Partner at a date as soon
as reasonably practicable, but in no event later than one hundred eighty
(180) days after such purchase, and bearing interest at an annual rate
equal to the total dividends declared with respect to one (1) REIT Share
for the four (4) preceding fiscal quarters of the General Partner, divided
by the Value as of the closing of such purchase; provided, further, that
such closing may be deferred to the extent necessary to effect compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, if
applicable, and any other applicable requirements of law. If it does not so
elect, the Transferring Partner may Transfer such Partnership Units to a
third party, on terms no more favorable to the transferee than the proposed
terms, subject to the other conditions of this Section 11.3.
(2) Qualified Transferee. Any Transfer of a Partnership Interest shall
be made only to a single Qualified Transferee; provided, however, that, for
such purposes, all Qualified Transferees that are Affiliates, or that
comprise investment accounts or funds managed by a single Qualified
Transferee and its Affiliates, shall be considered together to be a single
Qualified Transferee; provided, further, that each Transfer meeting the
minimum Transfer restriction of Section 11.3.A(3) hereof may be to a
separate Qualified Transferee.
(3) Minimum Transfer Restriction. Any Transferring Partner must
Transfer not less than the lesser of (i) the greater of five hundred (500)
Partnership Units or one-third ( 1/3) of the number of Partnership Units
owned by such Partner as of the Effective Date or (ii) all of the remaining
Partnership
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Units owned by such Transferring Partner; provided, however, that, for
purposes of determining compliance with the foregoing restriction, all
Partnership Units owned by Affiliates of Limited Partner shall be
considered to be owned by such Limited Partner.
(4) Transferee Agreement to Effect a Redemption. Any proposed
transferee shall deliver to the General Partner a written agreement
reasonably satisfactory to the General Partner to the effect that the
transferee will, within six (6) months after consummation of a Partnership
Common Units Transfer, tender its Partnership Common Units for Redemption
in accordance with the terms of the Redemption rights provided in Section
8.6 hereof.
(5) No Further Transfers. The transferee (other than a Designated
Party) shall not be permitted to effect any further Transfer of the
Partnership Units, other than to the General Partner.
(6) Exception for Permitted Transfers. The conditions of Sections
11.3.A(1) through 11.3.A(5) hereof shall not apply in the case of a
Permitted Transfer.
It is a condition to any Transfer otherwise permitted hereunder (whether or not
such Transfer is effected during or after the first Twelve-Month Period) that
the transferee assumes by operation of law or express agreement all of the
obligations of the transferor Limited Partner under this Agreement with respect
to such Transferred Partnership Interest, and no such Transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor Partner are assumed by a successor corporation by
operation of law) shall relieve the transferor Partner of its obligations under
this Agreement without the approval of the General Partner, in its sole and
absolute discretion. Notwithstanding the foregoing, any transferee of any
Transferred Partnership Interest shall be subject to any and all ownership
limitations (including, without limitation, the Ownership Limit) contained in
the Charter that may limit or restrict such transferee's ability to exercise its
Redemption rights, including, without limitation, the Ownership Limit. Any
transferee, whether or not admitted as a Substituted Limited Partner, shall take
subject to the obligations of the transferor hereunder. Unless admitted as a
Substituted Limited Partner, no transferee, whether by a voluntary Transfer, by
operation of law or otherwise, shall have any rights hereunder, other than the
rights of an Assignee as provided in Section 11.5 hereof.
B. Incapacity. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate, and such power as the Incapacitated Limited
Partner possessed to Transfer all or any part of its interest in the
Partnership. The Incapacity of Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. Opinion of Counsel. In connection with any Transfer of a Limited Partner
Interest, the General Partner shall have the right to receive an opinion of
counsel reasonably satisfactory to it to the effect that the proposed Transfer
may be effected without registration under the Securities Act and will not
otherwise violate any federal or state securities laws or regulations applicable
to the Partnership or the Partnership Interests Transferred. If, in the opinion
of such counsel, such Transfer would require the filing of a registration
statement under the Securities Act or would otherwise violate any federal or
state securities laws or regulations applicable to the Partnership or the
Partnership Units, the General Partner may prohibit any Transfer otherwise
permitted under this Section 11.3 by a Limited Partner of Partnership Interests.
D. Adverse Tax Consequences. No Transfer by a Limited Partner of its
Partnership Interests (including any Redemption, any other acquisition of
Partnership Units by the General Partner or any acquisition of Partnership Units
by the Partnership) may be made to any person if (i) in the opinion of legal
counsel for the Partnership, it would result in the Partnership being treated as
an association taxable as a corporation, or (ii) such Transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Code Section 7704.
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Section 11.4 Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a transferee
(including any Designated Party or other transferees pursuant to Transfers
permitted by Section 11.3 hereof) as a Limited Partner in its place. A
transferee (including, but not limited to, any Designated Party) of the interest
of a Limited Partner may be admitted as a Substituted Limited Partner only with
the Consent of the General Partner, which Consent may be given or withheld by
the General Partner in its sole an absolute discretion. The failure or refusal
by the General Partner to permit a transferee of any such interests to become a
Substituted Limited Partner shall not give rise to any cause of action against
the Partnership or the General Partner. Subject to the foregoing, an Assignee
shall not be admitted as a Substituted Limited Partner until and unless it
furnishes to the General Partner (i) evidence of acceptance, in form and
substance satisfactory to the General Partner, of all the terms, conditions and
applicable obligations of this Agreement, (ii) a counterpart signature page to
this Agreement executed by such Assignee and (iii) such other documents and
instruments as may be required or advisable, in the sole and absolute discretion
of the General Partner, to effect such Assignee's admission as a Substituted
Limited Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General Partner
shall amend Exhibit A to reflect the name, address and number of Partnership
Units of such Substituted Limited Partner and to eliminate or adjust, if
necessary, the name, address and number of Partnership Units of the predecessor
of such Substituted Limited Partner.
Section 11.5 Assignees. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee under
Section 11.3 hereof as a Substituted Limited Partner, as described in Section
11.4 hereof, such transferee shall be considered an Assignee for purposes of
this Agreement. An Assignee shall be entitled to all the rights of an assignee
of a limited partnership interest under the Act, including the right to receive
distributions from the Partnership and the share of Net Income, Net Losses and
other items of income, gain, loss, deduction and credit of the Partnership
attributable to the Partnership Units assigned to such transferee and the rights
to Transfer the Partnership Units provided in this Article 11, but shall not be
deemed to be a holder of Partnership Units for any other purpose under this
Agreement (other than as expressly provided in Section 8.6 hereof with respect
to a Qualifying Party that becomes a Tendering Party), and shall not be entitled
to effect a Consent or vote with respect to such Partnership Units on any matter
presented to the Limited Partners for approval (such right to Consent or vote,
to the extent provided in this Agreement or under the Act, fully remaining with
the transferor Limited Partner). In the event that any such transferee desires
to make a further assignment of any such Partnership Units, such transferee
shall be subject to all the provisions of this Article 11 to the same extent and
in the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
Section 11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted Transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11, with respect to which the transferee
becomes a Substituted Limited Partner, or pursuant to a redemption (or
acquisition by the Previous General Partner) of all of its Partnership Units
pursuant to a Redemption under Section 8.6 hereof and/or pursuant to any
Partnership Unit Designation.
B. Any Limited Partner who shall Transfer all of its Partnership Units in a
Transfer (i) permitted pursuant to this Article 11 where such transferee was
admitted as a Substituted Limited Partner, (ii) pursuant to the exercise of its
rights to effect a redemption of all of its Partnership Units pursuant to a
Redemption under Section 8.6 hereof and/or pursuant to any Partnership Unit
Designation or (iii) to the Previous General Partner or the General Partner,
whether or not pursuant to Section 8.6.B hereof, shall cease to be a Limited
Partner.
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C. If any Partnership Unit is Transferred in compliance with the provisions
of this Article 11, or is redeemed by the Partnership, or acquired by the
Previous General Partner pursuant to Section 8.6 hereof, on any day other than
the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof
and all other items of income, gain, loss, deduction and credit attributable to
such Partnership Unit for such Fiscal Year shall be allocated to the transferor
Partner or the Tendering Party, as the case may be, and, in the case of a
Transfer or assignment other than a Redemption, to the transferee Partner
(including, without limitation, the General Partner and the Special Limited
Partner as transferees of the Previous General Partner in the case of an
acquisition of Partnership Common Units pursuant to Section 8.6 hereof), by
taking into account their varying interests during the Fiscal Year in accordance
with Code Section 706(d), using the "interim closing of the books" method or
another permissible method selected by the General Partner. Solely for purposes
of making such allocations, each of such items for the calendar month in which a
Transfer occurs shall be allocated to the transferee Partner and none of such
items for the calendar month in which a Transfer or a Redemption occurs shall be
allocated to the transferor Partner or the Tendering Party, as the case may be,
if such Transfer occurs on or before the fifteenth (15th) day of the month,
otherwise such items shall be allocated to the transferor. All distributions of
Available Cash attributable to such Partnership Unit with respect to which the
Partnership Record Date is before the date of such Transfer, assignment or
Redemption shall be made to the transferor Partner or the Tendering Party, as
the case may be, and, in the case of a Transfer other than a Redemption, all
distributions of Available Cash thereafter attributable to such Partnership Unit
shall be made to the transferee Partner.
D. In addition to any other restrictions on Transfer herein contained, in
no event may any Transfer or assignment of a Partnership Interest by any Partner
(including any Redemption, any acquisition of Partnership Units by the Previous
General Partner or any other acquisition of Partnership Units by the
Partnership) be made (i) to any person or entity who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of applicable
law; (iii) of any component portion of a Partnership Interest, such as the
Capital Account, or rights to distributions, separate and apart from all other
components of a Partnership Interest; (iv) in the event that such Transfer would
cause either (a) the Previous General Partner to cease to comply with the REIT
Requirements or (b) the General Partner or the Special Limited Partner to cease
to qualify as a "qualified REIT subsidiary" (within the meaning of Code Section
856(i)(2)); (v) if such Transfer would, in the opinion of counsel to the
Partnership or the General Partner, cause a termination of the Partnership for
federal or state income tax purposes (except as a result of the Redemption (or
acquisition by the Previous General Partner) of all Partnership Common Units
held by all Limited Partners other than the Special Limited Partner); (vi) if
such Transfer would, in the opinion of legal counsel to the Partnership, cause
the Partnership to cease to be classified as a partnership for federal income
tax purposes (except as a result of the Redemption (or acquisition by the
Previous General Partner) of all Partnership Common Units held by all Limited
Partners other than the Special Limited Partner); (vii) if such Transfer would
cause the Partnership to become, with respect to any employee benefit plan
subject to Title I of ERISA, a "party-in-interest" (as defined in ERISA Section
3(14)) or a "disqualified person" (as defined in Code Section 4975(c)); (viii)
if such Transfer would, in the opinion of legal counsel to the Partnership,
cause any portion of the assets of the Partnership to constitute assets of any
employee benefit plan pursuant to Department of Labor Regulations Section
2510.2-101; (ix) if such Transfer requires the registration of such Partnership
Interest pursuant to any applicable federal or state securities laws; (x) if
such Transfer causes the Partnership to become a "publicly traded partnership,"
as such term is defined in Code Section 469(k)(2) or Code 7704(b); or (xi) if
such Transfer subjects the Partnership to regulation under the Investment
Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as
amended.
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ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner. A successor to all of
the General Partner's General Partner Interest pursuant to Section 11.2 hereof
who is proposed to be admitted as a successor General Partner shall be admitted
to the Partnership as the General Partner, effective immediately prior to such
Transfer. Any such successor shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission.
Section 12.2 Admission of Additional Limited Partners.
A. After the admission to the Partnership of an Original Limited Partner on
the date hereof, a Person (other than an existing Partner) who makes a Capital
Contribution to the Partnership in accordance with this Agreement shall be
admitted to the Partnership as an Additional Limited Partner only upon
furnishing to the General Partner (i) evidence of acceptance, in form and
substance satisfactory to the General Partner, of all of the terms and
conditions of this Agreement, including, without limitation, the power of
attorney granted in Section 2.4 hereof, (ii) a counterpart signature page to
this Agreement executed by such Person and (iii) such other documents or
instruments as may be required in the sole and absolute discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person
shall be admitted as an Additional Limited Partner without the consent of the
General Partner, which consent may be given or withheld in the General Partner's
sole and absolute discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Fiscal Year, then Net Income, Net Losses, each
item thereof and all other items of income, gain, loss, deduction and credit
allocable among Partners and Assignees for such Fiscal Year shall be allocated
among such Additional Limited Partner and all other Partners and Assignees by
taking into account their varying interests during the Fiscal Year in accordance
with Code Section 7 using the "interim closing of the books" method or another
permissible method selected by the General Partner. Solely for purposes of
making such allocations, each of such items for the calendar month in which an
admission of any Additional Limited Partner occurs shall be allocated among all
the Partners and Assignees including such Additional Limited Partner, in
accordance with the principles described in Section 11.6.C hereof. All
distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
Assignees other than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all the Partners and Assignees
including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership. For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power attorney granted pursuant to Section
2.4 hereof.
Section 12.4 Admission of Initial Limited Partners. The Persons listed on
Exhibit A as limited partners of the Partnership shall be admitted to the
Partnership as Limited Partners upon their execution and delivery of this
Agreement.
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ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership without
dissolution. However, the Partnership shall dissolve, and its affairs shall be
wound up, upon the first to occur of an of the following (each a "Liquidating
Event"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal, as defined in the Act (including, without
limitation, bankruptcy), of the sole General Partner unless, within ninety (90)
days after the withdrawal, a "majority in interest" (as such phrase is used in
Section 17-801(3) of the Act) of the remaining Partners agree in writing, in
their sole and absolute discretion, to continue the business of the Partnership
and to the appointment, effective as of the date of withdrawal, of a successor
General Partner:
C. an election to dissolve the Partnership made by the General Partner in
its sole and absolute discretion, with or without the Consent of the Limited
Partners;
D. entry of a decree of judicial dissolution of the Partnership pursuant to
the provisions of the Act;
E. the occurrence of a Terminating Capital Transaction;
F. the Redemption (or acquisition by the Previous General Partner, the
General Partner and/or the Special Limited Partner) of all Partnership Common
Units other than Partnership Common Units held by the General Partner or the
Special Limited Partner; or
G. the Redemption (or acquisition by the General Partner) of all
Partnership Common Units other than Partnership Common Units held by the General
Partner.
Section 13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its creditors and Partners.
After the occurrence of a Liquidating Event, no Partner shall take any action
that is inconsistent with, or not necessary to or appropriate for, the winding
up of the Partnership's business and affairs. The General Partner (or, in the
event that there is no remaining General Partner or the General Partner has
dissolved, become bankrupt within the meaning of the Act or ceased to operate,
any Person elected by a Majority in Interest of the Limited Partners (the
General Partner or such other Person being referred to herein as the
"Liquidator")) shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property, and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner,
include shares of stock in the Previous General Partner) shall be applied and
distributed in the following order:
(1) First, to the satisfaction of all of the Partnership's debts and
liabilities to creditors other than the Partners and their Assignees
(whether by payment or the making of reasonable provision for payment
thereof);
(2) Second, to the satisfaction of all of the Partnership's debts and
liabilities to the General Partner (whether by payment or the making of
reasonable provision for payment thereof), including, but not limited to,
amounts due as reimbursements under Section 7.4 hereof;
(3) Third, to the satisfaction of all of the Partnership's debts and
liabilities to the other Partners and any Assignees (whether by payment or
the making of reasonable provision for payment thereof); and
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(4) Subject to the terms of any Partnership Unit Designation, the
balance, if any, to the General Partner, the Limited Partners and any
Assignees in accordance with and in proportion to their positive Capital
Account balances, after giving effect to all contributions, distributions
and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof that require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the event that the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the Partners and Assignees that have positive Capital
Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) to the
extent of, and in proportion to, positive Capital Account balances. If any
Partner has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation occurs), such Partner shall have no
obligation to make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Partnership or to any other Person for any purpose whatsoever. In the sole
and absolute discretion of the General Partner or the Liquidator, a pro rata
portion of the distributions that would otherwise be made to the Partners
pursuant to this Article 13 may be withheld or escrowed to provide a reasonable
reserve for Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority set
forth in Section 13.2.A hereof as soon as practicable.
Section 13.3 Deemed Distribution and Recontribution. Notwithstanding any
other provision of this Article 13, in the event that the Partnership is
liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but
no Liquidating Event has occurred, the Partnership's Property shall not be
liquidated, the Partnership's liabilities shall not be paid or discharged and
the Partnership's affairs shall not be wound up. Instead, for federal income tax
purposes the Partnership shall be deemed to have distributed the Property in
kind to the Partners and the Assignees, who shall be deemed to have assumed and
taken such Property subject to all Partnership liabilities, all in accordance
with their respective Capital Accounts. Immediately thereafter, the Partners and
the Assignees shall be deemed to have recontributed the Partnership Property in
kind to the Partnership, which shall be deemed to have assumed and taken such
Property subject to all such liabilities; provided, however, that nothing in
this Section 13.3 shall be deemed to have constituted any Assignee as a
Substituted Limited Partner without compliance with the provisions of Section
11.4 hereof.
Section 13.4 Rights of Limited Partners. Except as otherwise provided in
this Agreement, (a) each Limited Partner shall look solely to the assets of the
Partnership for the return of its Capital Contribution, (b) no Limited Partner
shall have the right or power to demand or receive property other than cash from
the Partnership and (c) no Limited Partner shall have priority over any other
Limited Partner as to the return of its Capital Contributions, distributions or
allocations.
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Section 13.5 Notice of Dissolution. In the event that a Liquidating Event
occurs or an event occurs that would, but for an election or objection by one or
more Partners pursuant to Section 13.1 hereof, result in a dissolution of the
Partnership, the General Partner shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Partners and, in the General
Partner's sole and absolute discretion or as required by the Act, to all other
parties with whom the Partners regularly conducts business (as determined in the
sole and absolute discretion of the General Partner), and the General Partner
may, or, if required by the Act, shall, publish notice thereof in a newspaper of
general circulation in each place in which the Partnership regularly conducts
business (as determined in the sole and absolute discretion of the General
Partner).
Section 13.6 Cancellation of Certificate of Limited Partnership. Upon the
completion of the liquidation of the Partnership cash and property as provided
in Section 13.2 hereof, the Partnership shall be terminated, a certificate of
cancellation shall be filed with the State of Delaware, all qualifications of
the Partnership as a foreign limited partnership or association in jurisdictions
other than the State of Delaware shall be cancelled, and such other actions as
may be necessary to terminate the Partnership shall be taken.
Section 13.7 Reasonable Time for Winding-Up. A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 13.2 hereof,
in order to minimize any losses otherwise attendant upon such winding-up, and
the provisions of this Agreement shall remain in effect between the Partners
during the period of liquidation.
ARTICLE 14
PROCEDURES FOR ACTIONS AND CONSENTS
OF PARTNERS; AMENDMENTS; MEETINGS
Section 14.1 Procedures for Actions and Consents of Partners. The actions
requiring consent or approval of Limited Partners pursuant to this Agreement,
including Section 7.3 hereof, or otherwise pursuant to applicable law, are
subject to the procedures set forth in this Article 14.
Section 14.2 Amendments. Amendments to this Agreement may be proposed by
the General Partner or by a Majority in Interest of the Limited Partners.
Following such proposal, the General Partner shall submit any proposed amendment
to the Limited Partners. The General Partner shall seek the written consent of
the Limited Partners on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that the General Partner may deem
appropriate. For purposes of obtaining a written consent, the General Partner
may require a response within a reasonable specified time, but not less than
fifteen (15) days, and failure to respond in such time period shall constitute a
consent that is consistent with the General Partner's recommendation with
respect to the proposal; provided, however, that an action shall become
effective at such time as requisite consents are received even if prior to such
specified time.
Section 14.3 Meetings of the Partners.
A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by a
Majority in Interest of the Limited Partners. The call shall state the nature of
the business to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven (7) days nor more than thirty (30) days prior to
the date of such meeting. Partners may vote in person or by proxy at such
meeting. Whenever the Consent of Partners is permitted or required under this
Agreement, such vote or Consent may be given at a meeting of Partners or may be
given in accordance with the procedure prescribed in Section 14.3.B hereof.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement
for the action in question). Such consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of a majority of
the Percentage Interests of Partners (or such other percentage as is expressly
required by this Agreement). Such consent shall be filed with the General
Partner. An action so taken shall be deemed to have been taken at a meeting held
on the effective date so certified.
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C. Each Limited Partner may authorize any Person or Persons to act for it
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or its
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy (or there is
receipt of a proxy authorizing a later date). Every proxy shall be revocable at
the pleasure of the Limited Partner executing it, such revocation to be
effective upon the Partnership's receipt of written notice of such revocation
from the Limited Partner executing such proxy.
D. Each meeting of Partners shall be conducted by the General Partner or
such other Person as the General Partner may appoint pursuant to such rules for
the conduct of the meeting as the General Partner or such other Person deems
appropriate in its sole and absolute discretion. Without limitation, meetings of
Partners may be conducted in the same manner as meetings of the General
Partner's shareholders and may be held at the same time as, and as part of, the
meetings of the General Partner's shareholders.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to a Partner or Assignee under this
Agreement shall be in writing and shall be deemed given or made when delivered
in person or when sent by first class United States mail or by other means of
written communication (including by telecopy, facsimile, or commercial courier
service) to the Partner or Assignee at the address set forth in Exhibit A or
such other address of which the Partner shall notify the General Partner in
writing.
Section 15.2 Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" or "Sections" are to Articles and Sections of this
Agreement.
Section 15.3 Pronouns and Plurals. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
Section 15.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
Section 15.6 Waiver.
A. No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
B. The restrictions, conditions and other limitations on the rights and
benefits of the Limited Partners contained in this Agreement, and the duties,
covenants and other requirements of performance or notice by the Limited
Partners, are for the benefit of the Partnership and, except for an obligation
to pay money to the Partnership, may be waived or relinquished by the General
Partner, in its sole and absolute discretion, on behalf of the Partnership in
one or more instances from time and at any time; provided, however, that any
such waiver or relinquishment may not be made if it would have the effect of (i)
creating liability for any other Limited Partner, (ii) causing the Partnership
to cease to qualify as a limited partnership, (iii) reducing the amount of cash
otherwise distributable to the Limited Partners, (iv) resulting in the
classification of the Partnership as an association or publicly traded
partnership taxable as a corporation or (v) violating the
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Securities Act, the Exchange Act or any state "blue sky" or other securities
laws; provided, further, that any waiver relating to compliance with the
Ownership Limit or other restrictions in the Charter shall be made and shall be
effective only as provided in the Charter.
Section 15.7 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
Section 15.8 Applicable Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware,
without regard to the principles of conflicts of law. In the event of a conflict
between any provision of this Agreement and any non-mandatory provision of the
Act, the provisions of this Agreement shall control and take precedence.
Section 15.9 Entire Agreement. This Agreement contains all of the
understandings and agreements between and among the Partners with respect to the
subject matter of this Agreement and the rights, interests and obligations of
the Partners with respect to the Partnership.
Section 15.10 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
Section 15.11 Limitation to Preserve REIT Status. Notwithstanding anything
else in this Agreement, to the extent that the amount paid, credited,
distributed or reimbursed by the Partnership to any REIT Partner or its
officers, directors, employees or agents, whether as a reimbursement, fee,
expense or indemnity (a "REIT Payment"), would constitute gross income to the
REIT Partner for purposes of Code Section 856(c)(2) or Code Section 856(c)(3),
then, notwithstanding any other provision of this Agreement, the amount of such
REIT Payments, as selected by the General Partner in its discretion from among
items of potential distribution, reimbursement, fees, expenses and indemnities,
shall be reduced for any Fiscal Year so that the REIT Payments, as so reduced,
for or with respect to such REIT Partner shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) four and nine-tenths
percent (4.9%) of the REIT Partner's total gross income (but excluding the
amount of any REIT Payments) for the Fiscal Year that is described in
subsections (A) through (H) of Code Section 856(c)(2) over (b) the amount
of gross income (within the meaning of Code Section 856(c)(2)) derived by
the REIT Partner from sources other than those described in subsections (A)
through (H) of Code Section 856(c)(2) (but not including the amount of any
REIT Payments); or
(ii) an amount equal to the excess, if any, of (a) twenty-four percent
(24%) of the REIT Partner's total gross income (but excluding the amount of
any REIT Payments) for the Fiscal Year that is described in subsections (A)
through (I) of Code Section 856(c)(3) over (b) the amount of gross income
(within the meaning of Code Section 856(c)(3)) derived by the REIT Partner
from sources other than those described in subsections (A) through (I) of
Code Section 856(c)(3) (but not including the amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts set forth in
clauses (i) and (ii) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 15.11, such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. The purpose of the limitations contained in this Section 15.11 is
to prevent any REIT Partner from failing to qualify as a REIT under the Code by
reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Partnership, and this Section 15.11 shall be interpreted and applied to
effectuate such purpose.
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Section 15.12 No Partition. No Partner nor any successor-in-interest to a
Partner shall have the right while this Agreement remains in effect to have any
property of the Partnership partitioned, or to file a complaint or institute any
proceeding at law or in equity to have such property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors and
assigns hereby waives any such right. It is the intention of the Partners that
the rights of the parties hereto and their successors-in-interest to Partnership
property, as among themselves, shall be governed by the terms of this Agreement,
and that the rights of the Partners and their successors-in-interest shall be
subject to the limitations and restrictions as set forth in this Agreement.
Section 15.13 No Third-Party Rights Created Hereby. The provisions of this
Agreement are solely for the purpose of defining the interests of the Partners,
inter se; and no other person, firm or entity (i.e., a party who is not a
signatory hereto or a permitted successor to such signatory hereto) shall have
any right, power, title or interest by way of subrogation or otherwise, in and
to the rights, powers, title and provisions of this Agreement. No creditor or
other third party having dealings with the Partnership shall have the right to
enforce the right or obligation of any Partner to make Capital Contributions or
loans to the Partnership or to pursue any other right or remedy hereunder or at
law or in equity. None of the rights or obligations of the Partners herein set
forth to make Capital Contributions or loans to the Partnership shall be deemed
an asset of the Partnership for any purpose by any creditor or other third
party, nor may any such rights or obligations be sold, transferred or assigned
by the Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or any of the Partners.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
written above.
PREVIOUS GENERAL PARTNER:
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ PETER KOMPANIEZ
----------------------------------
Name: Peter Kompaniez
Title: President
GENERAL PARTNER:
AIMCO-GP, INC.
By: /s/ PETER KOMPANIEZ
----------------------------------
Name: Peter Kompaniez
Title: President
SPECIAL LIMITED PARTNER:
AIMCO-LP, INC.
By: /s/ PETER KOMPANIEZ
----------------------------------
Name: Peter Kompaniez
Title: President
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LIMITED PARTNERS:
By: AIMCO-GP, INC.,
as attorney-in-fact
By: /s/ PETER KOMPANIEZ
----------------------------------
Name: Peter Kompaniez
Title: President
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LETTER OF TRANSMITTAL
TO TENDER UNITS OF LIMITED PARTNERSHIP INTEREST
IN
[ ]
LIMITED PARTNERSHIP
PURSUANT TO AN OFFER
DATED [ ] [ ], 1998
BY
AIMCO PROPERTIES, L.P.
---------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., DENVER TIME, ON [ ] [ ], 1998, UNLESS EXTENDED.
---------------------
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
Toll Free (818) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
To participate in the offer, you must send a duly executed copy of this
Letter of Transmittal and you must send such duly executed Letter of Transmittal
and any other documents required by this Letter of Transmittal so that such
documents are received by River Oaks Partnership Services, Inc., the Information
Agent, on or prior to the Expiration Date. THE METHOD OF DELIVERY OF THIS LETTER
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY. DELIVERY OF THIS LETTER OF TRANSMITTAL OR ANY OTHER REQUIRED DOCUMENTS
TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
FOR INFORMATION OR ASSISTANCE IN CONNECTION WITH THE OFFER OR THE
COMPLETION OF THIS LETTER OF TRANSMITTAL, PLEASE CONTACT THE INFORMATION AGENT
AT (888) 349-2005 (TOLL FREE) OR (201) 896-1900.
<PAGE> 163
<TABLE>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF UNITS TENDERED
- --------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE INDICATE CHANGES
OR NUMBER OF UNITS TENDERED
CORRECTIONS TO THE NAME, (ATTACH ADDITIONAL LIST, IF NECESSARY)
ADDRESS AND
TAX IDENTIFICATION NUMBER
PRINTED BELOW.)
- --------------------------------------------------------------------------------------------------------------------
2. NUMBER 3. NUMBER
OF UNITS OF UNITS 4. NUMBER 5. TOTAL
1. TOTAL TENDERED FOR TENDERED FOR OF UNITS NUMBER
NUMBER OF PREFERRED COMMON TENDERED FOR OF UNITS
UNITS OWNED OP UNITS* OP UNITS* CASH* TENDERED
(#) (#) (#) (#) (#)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
* Less the amount of distributions, if any, made by the Partnership from the date of the Prospectus Supplement
until the Expiration Date.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4 AND 9)
To be completed ONLY if the consideration for the purchase price of Units
accepted for payment is to be issued in the name of someone other than the
undersigned.
[ ] Issue consideration to:
Name:
---------------------------------------------------------------------
(Please type or Print)
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
- -------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
(See Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2, 4 AND 9)
To be completed ONLY if the consideration for the purchase price of Units
accepted for payment is to be sent to someone other than the undersigned or to
the undersigned at an address other than that shown above.
[ ] Mail consideration to:
Name:
--------------------------------------------------------------------------
(Please type or Print)
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
<PAGE> 164
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby acknowledges that he or she has received and
reviewed (i) Apartment Investment and Management Company and AIMCO Properties,
Inc. Prospectus, dated [ ] [ ], 1998, as supplemented or
amended from time to time, (ii) the Prospectus Supplement of AIMCO Properties,
L.P., (the "Purchaser") dated [ ] [ ], which describes the
exchange offer, as supplemented or amended form time to time, [and] (iii) this
Letter of Transmittal, including the Instructions hereto, as it may be
supplemented or amended from time to time (the "Letter of Transmittal")[, and
(iv) the Partnerships' Form 10-K[SB] for the year ended December 31, 1997 and
Form 10-Q[SB] for the quarter ended June 30, 1998] (all constituting the
"Offer").
Upon the terms and subject to the conditions set forth in the Offer and
this Letter of Transmittal, the undersigned hereby tenders to the Purchaser the
units of limited partnership interest ("Units") in [ ], a
[ ] limited partnership (the "Partnership"), set forth in the box
above entitled "Description of Units Tendered" under the column entitled "Total
Number of Units Tendered." For each Unit that you tender, you may choose to
receive as consideration per Unit (the "Offer Price") any combination of
Tax-Deferral % Partnership Unit, ("Preferred OP Unit"), Tax-
Deferral Partnership Common Units ("Common OP Units") or $ in cash,
reduced in each case for the amount of distributions, if any, made by the
Partnership from the date of the Prospectus Supplement until the Expiration
Date. The number of Units you choose to tender for each type of consideration
will be set forth by you in the box above entitled "Description of Units
Tendered" under the columns entitled "Number of Units Tendered for Preferred OP
Units," "Number of Units Tendered for Common OP Units," and "Number of Units
Tendered for Cash." All holders of Units who do not specify which type of
consideration they wish to receive will be deemed to have elected to receive
Preferred OP Units.
Subject to and effective upon acceptance for payment of any of the Units
tendered hereby in accordance with the terms of the Offer, the undersigned
hereby irrevocably sells, assigns, transfers, conveys and delivers to, or upon
the order of, the Purchaser all right, title and interest in and to such Units
tendered hereby that are accepted for payment pursuant to the Offer, including,
without limitation, (i) all of the undersigned's interest in the capital of the
Partnership, and the undersigned's interest in all profits, losses and
distributions of any kind to which the undersigned shall at any time be entitled
in respect of the Units; (ii) all other payments, if any, due or to become due
to the undersigned in respect of the Units, under or arising out of the
Partnership Agreement, whether as contractual obligations, damages, insurance
proceeds, condemnation awards or otherwise; (iii) all of the undersigned's
claims, rights, powers, privileges, authority, options, security interests,
liens and remedies, if any, under or arising out of the Partnership Agreement or
the undersigned's ownership of the Units, including, without limitation, all
voting rights, rights of first offer, first refusal or similar rights, and
rights to be substituted as a limited partner of the Partnership; and (iv) all
present and future claims, if any, of the undersigned against the Partnership or
its partners under or arising out of the Partnership Agreement for monies loaned
or advanced, for services rendered, for the management of the Partnership or
otherwise.
The undersigned hereby irrevocably constitutes and appoints the Purchaser
and any designees of the Purchaser as the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Units, with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to vote or act in such manner as any such attorney
and proxy or substitute shall, in its sole discretion, deem proper with respect
to such Units, to deliver such Units and transfer ownership of such Units on the
partnership books maintained by the general partner of the Partnership, together
with all accompanying evidence of transfer and authenticity to, or upon the
order of, the Purchaser, to sign any and all documents necessary to authorize
the transfer of the Units to the Purchaser including, without limitation, the
"Transferor's (Seller's) Application for Transfer" created by the National
Association of Securities Dealers, Inc., if required, and upon receipt by the
Information Agent, as the undersigned's agent, of the offer price, to become a
substitute limited partner, to receive any and all distributions made by the
Partnership from and after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Units all in
accordance with the terms of the Offer. NOTWITHSTANDING ANY PROVISION IN THE
PARTNERSHIP AGREEMENT TO THE CONTRARY, THE UNDERSIGNED HEREBY DIRECTS THE
GENERAL PARTNER OF THE PARTNERSHIP TO MAKE ALL
<PAGE> 165
DISTRIBUTIONS AFTER THE PURCHASER ACCEPTS THE TENDERED UNITS FOR PAYMENT TO THE
PURCHASER OR ITS DESIGNEE. The Purchaser reserves the right to transfer or
assign, in whole or in part, from time to time, to one or more of its
affiliates, the right to purchase Units tendered pursuant to the Offer, but any
such transfer or assignment will not relieve the Purchaser of its obligations
under the Offer or prejudice the rights of tendering Limited Partners to receive
payment for Units validly tendered and accepted for payment pursuant to the
Offer. Subject to and effective upon acceptance for payment of any Unit tendered
hereby, the undersigned hereby requests that the Purchaser be admitted to the
Partnership as a substitute limited partner under the terms of the Partnership
Agreement. Upon request, the undersigned will execute and deliver additional
documents deemed by the Information Agent or the Purchaser to be necessary or
desirable to complete the assignment, transfer and purchase of Units tendered
hereby and will hold any distributions received from the Partnership after the
Expiration Date in trust for the benefit of the Purchaser and, if necessary,
will promptly forward to the Purchaser any such distributions immediately upon
receipt. Upon the purchase of Units pursuant to the Offer, all prior proxies and
consents given by the undersigned with respect to such Units will be revoked and
no subsequent proxies or consents may be given (and if given will not be deemed
effective).
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (a) appoints the Purchaser and its general
partner managers and designees (each an "Agent") as the undersigned's
attorneys-in-fact, each with full power of substitution, with an irrevocable
instruction to each Agent to discretion in relation to the Units tendered hereby
and accepted for payment by the Purchaser, and to do all such other acts and
things as may in the opinion of the Agent be necessary or expedient for the
purpose of, or in connection with, the undersigned's acceptance of the offer and
to vest in the Purchaser, or as it may direct, those Units, effective when, and
only to the extent that, the Purchaser accepts the tendered Units for payment;
(b) authorizes and requests the Partnership and general partner to take any and
all acts as may be required to effect the transfer of the undersigned's Units to
the Purchaser (or it designee) and admit the Purchaser (or its designee) as a
substituted Limited Partner in the Partnership; (c) assigns to the Purchaser and
its assigns all of the right, title and interest of the undersigned in and to
any and all distributions made by the Partnership from and after the expiration
of the offer in respect of the Units tendered by the undersigned; (d) grants to
the Purchaser and its assigns the right to receive any and all distributions
made by the Partnership on or after the date on which the Purchaser pays for the
Units tendered by the undersigned (regardless of the record date for any such
distribution), and to receive all benefits and otherwise exercise all rights of
beneficial ownership of such Units; (e) empowers the Purchaser and the Agent to
execute and deliver to the general partner a change of address form instructing
the general partner to send any and all future distributions to the address
specified in the form, and to endorse any check payable to or upon the order of
such Limited Partner representing a distribution to which the Purchaser is
entitled to the terms of the offer, in each case in the name and on behalf of
the tendering Limited Partner; and (f) agrees not to exercise any rights
pertaining to the Units without the prior consent of the Purchaser.
By executing this Letter of Transmittal, the undersigned represents that
either (a) the undersigned is not a plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed
to hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of any
such plan, or (b) the tender and acceptance of Units pursuant to the Offer will
not result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
The undersigned understands that a tender of Units to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in the Offer, the Purchaser may not
be required to accept for payment any of the Units tendered hereby. In such
event, the undersigned understands that any Letter of Transmittal for Units not
accepted for payment may be destroyed by the Purchaser (or its agent). Except as
stated in the Offer, this tender is irrevocable, provided that Units tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
and, unless already accepted for payment as provided in the Offer, may also be
withdrawn at any time after [ ] [ ], 1998.
THE UNDERSIGNED HAS BEEN ADVISED THAT THE PURCHASER IS AN AFFILIATE OF THE
GENERAL PARTNER OF THE PARTNERSHIP AND THE GENERAL PARTNER OF THE PARTNERSHIP
MAKES NO RECOMMENDATION TO THE UNDERSIGNED AS TO WHETHER TO TENDER OR TO REFRAIN
FROM TENDERING UNITS IN THE OFFER AND THE UNDERSIGNED HAS MADE HIS OR HER OWN
DECISION TO TENDER UNITS.
<PAGE> 166
The undersigned hereby represents and warrants for the benefit of the
Partnership and the Purchaser that the undersigned owns the Units tendered
hereby and has full power and authority and has taken all necessary action to
validly tender, sell, assign, transfer, convey and deliver the Units tendered
hereby and that when the same are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title thereto, free and
clear of all liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer thereof, and
such Units will not be subject to any adverse claims and that the transfer and
assignment contemplated herein are in compliance with all applicable laws and
regulations. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any obligations of the
undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
<PAGE> 167
SIGNATURE BOX
(SEE INSTRUCTION 2)
Please sign exactly as your name is printed on the front of this Letter of
Transmittal. For joint owners, each joint owner must sign. (See Instruction 2).
TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS
OF A CORPORATION OR OTHER PERSONS ACTING IN A FIDUCIARY OR REPRESENTATIVE
CAPACITY, PLEASE COMPLETE THIS BOX AND SEE INSTRUCTION 2.
The signatory hereto hereby tenders the Units indicated in this Letter of
Transmittal to the Purchaser pursuant to the terms of the Offers, and certifies
under penalties of perjury that the statements in Box A, Box B and, if
applicable, Box C are true.
X
-------------------------------------------------------------------------------
(SIGNATURE OF OWNER)
X
-------------------------------------------------------------------------------
(SIGNATURE OF JOINT OWNER)
Name and Capacity (if other than individuals):
----------------------------------
Title:
--------------------------------------------------------------------------
Address (Fiduciaries only):
-----------------------------------------------------
- --------------------------------------------------------------------------------
(CITY) (STATE) (ZIP)
Area Code and Telephone No. (Day):
----------------------------------------------
(Evening):
----------------------------------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED)
(SEE INSTRUCTION 2)
Name and Address of Eligible Institution:
---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Authorized Signature: X
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
Title: Date:
------------------------------------- --------------------------
<PAGE> 168
TAX CERTIFICATIONS
(SEE INSTRUCTION 4)
By signing the Letter of Transmittal in the Signature Box, the Limited
Partner certifies as true under penalty of perjury, the representations in Boxes
A, B and C below. Please refer to the attached Instructions for completing this
Letter of Transmittal and Boxes A, B and C below.
BOX A
SUBSTITUTE FORM W-9
(SEE INSTRUCTION 4 -- BOX A)
The person signing this Letter of Transmittal hereby certifies the
following to the Purchaser under penalties of perjury:
(i) The Taxpayer Identification No. ("TIN") printed (or corrected) on the
front of this Letter of Transmittal is the correct TIN of the Limited Partner,
unless the Units are held in an Individual Retirement Account (IRA); or if this
box [ ] is checked, the Limited Partner has applied for a TIN. If the Limited
Partner has applied for a TIN, a TIN has not been issued to the Limited Partner,
and either (a) the Limited Partner has mailed or delivered an application to
receive a TIN to the appropriate IRS Center or Social Security Administration
Office, or (b) the Limited Partner intends to mail or deliver an application in
the near future (it being understood that if the Limited Partner does not
provide a TIN to the Purchaser, 31% of all reportable payments made to the
Limited Partner will be withheld); and
(ii) Unless this box [ ] is checked, the Limited Partner is not subject to
backup withholding either because the Limited Partner: (a) is exempt from backup
withholding; (b) has not been notified by the IRS that the Limited Partner is
subject to backup withholding as a result of a failure to report all interest or
dividends; or (c) has been notified by the IRS that such Limited Partner is no
longer subject to backup withholding.
Note: Place an "X" in the box in (ii) above, only if you are unable to certify
that the Limited Partner is not subject to backup withholding.
<PAGE> 169
BOX B
FIRPTA AFFIDAVIT
(SEE INSTRUCTION 4 -- BOX B)
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg.
1.1445-11T(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a partnership if
50% or more of the value of its gross assets consists of U.S. real property
interests and 90% or more of the value of its gross assets consists of U.S. real
property interests plus cash equivalents, and the holder of the partnership
interest is a foreign person. To inform the Purchaser that no withholding is
required with respect to the Limited Partner's Units in the Partnership, the
person signing this Letter of Transmittal hereby certifies the following under
penalties of perjury:
(i) Unless this box [ ] is checked, the Limited Partner, if an individual,
is a U.S. citizen or a resident alien for purposes of U.S. income taxation, and
if other than an individual, is not a foreign corporation, foreign partnership,
foreign estate or foreign trust (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
(ii) The Limited Partner's U.S. social security number (for individuals) or
employer identification number (for non-individuals) is correct as furnished in
the blank provided for that purpose on the front of the Letter of Transmittal;
(iii) The Limited Partner's home address (for individuals), or office
address (for non-individuals), is correctly printed (or corrected) on the front
of this Letter of Transmittal; and
(iv) If the Limited Partner is a corporation, then the jurisdiction of
incorporation is ____________________.
The person signing this Letter of Transmittal understands that this
certification may be disclosed to the IRS by the Purchaser and that any false
statements contained herein could be punished by fine, imprisonment, or both.
(SEE BOX C ON REVERSE SIDE)
<PAGE> 170
BOX C
SUBSTITUTE FORM W-8
(SEE INSTRUCTION 4 -- BOX C)
By checking this box [ ], the person signing this Letter of Transmittal
hereby certifies under penalties of perjury that the Limited Partner is an
"exempt foreign person" for purposes of the Backup Withholding rules under the
U.S. Federal income tax laws, because the Limited Partner has the following
characteristics:
(i) Is a nonresident alien individual or a foreign corporation,
partnership, estate or trust;
(ii) If an individual, has not been and plans not to be present in the U.S.
for a total of 183 days or more during the calendar year; and
(iii) Neither engages, nor plans to engage, in a U.S. trade or business
that has effectively connected gains from transactions with a broker or barter
exchange.
<PAGE> 171
INSTRUCTIONS
FOR COMPLETING LETTER OF TRANSMITTAL
1. REQUIREMENTS OF TENDER. To be effective, a duly completed and signed Letter
of Transmittal (or facsimile thereof) and any other required documents must
be received by the Information Agent at one of its addresses (or its
facsimile number) set forth herein before 5:00 p.m., Denver Time, on
[ ] [ ], 1998, unless extended. To ensure receipt of the
Letter of Transmittal and any other required documents, it is suggested
that you use overnight courier delivery or, if the Letter of Transmittal
and any other required documents are to be delivered by United States mail,
that you use certified or registered mail, return receipt requested.
LETTERS OF TRANSMITTAL WHICH HAVE BEEN DULY EXECUTED, BUT WHERE NO
DEFINITIVE INDICATION IS MARKED IN THE BOX ENTITLED "DESCRIPTION OF UNITS
TENDERED" UNDER THE COLUMNS ENTITLED "NUMBER OF UNITS TENDERED FOR
PREFERRED OP UNITS," "NUMBER OF UNITS TENDERED FOR COMMON OP UNITS," AND
"NUMBER OF UNITS TENDERED FOR CASH" SHALL BE DEEMED TO HAVE TENDERED ALL
UNITS FOR PREFERRED OP UNITS PURSUANT TO THE OFFER.
WHEN TENDERING BY FACSIMILE, PLEASE TRANSMIT ALL PAGES OF THE LETTER OF
TRANSMITTAL, INCLUDING TAX CERTIFICATIONS (BOXES A, B AND C).
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED PARTNER AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
2. SIGNATURE REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS -- After carefully reading and completing the
Letter of Transmittal, to tender Units, Limited Partners must sign at the
"X" in the Signature Box of the Letter of Transmittal. The signature(s)
must correspond exactly with the names printed (or corrected) on the front
of the Letter of Transmittal. IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE
LIMITED PARTNER (OR BENEFICIAL OWNER IN THE CASE OF AN IRA), NO SIGNATURE
GUARANTEE ON THE LETTER OF TRANSMITTAL IS REQUIRED. If any tendered Units
are registered in the names of two or more joint owners, all such owners
must sign this Letter of Transmittal.
IRA'S/ELIGIBLE INSTITUTIONS -- FOR UNITS HELD IN AN IRA ACCOUNT, THE
BENEFICIAL OWNER SHOULD SIGN IN THE SIGNATURE BOX AND NO SIGNATURE
GUARANTEE IS REQUIRED. Similarly, if Units are tendered for the account of
a member firm of a registered national security exchange, a member firm of
the National Association of Securities Dealers, Inc. or a commercial bank,
savings bank, credit union, savings and loan association or trust company
having an office, branch or agency in the United States (each an "Eligible
Institution"), no signature guarantee is required.
TRUSTEES, CORPORATIONS, PARTNERSHIPS AND FIDUCIARIES -- Trustees,
executors, administrators, guardians, attorneys-in-fact, officers of a
corporation, authorized partners of a partnership or other persons acting
in a fiduciary or representative capacity must sign at the "X" in the
Signature Box and have their signatures guaranteed by an Eligible
Institution by completing the signature guarantee set forth in the
Signature Box of the Letter of Transmittal. If the Letter of Transmittal is
signed by trustees, administrators, guardians, attorneys-in-fact, officers
of a corporation, authorized partners of a partnership or others acting in
a fiduciary or representative capacity, such persons should, in addition to
having their signatures guaranteed, indicate their title in the Signature
Box and must submit proper evidence satisfactory to the Purchaser of their
authority to so act (see Instruction 3 below).
3. DOCUMENTATION REQUIREMENTS. In addition to the information required to be
completed on the Letter of Transmittal, additional documentation may be
required by the Purchaser under certain circumstances including, but not
limited to, those listed below. Questions on documentation should be
directed to the Information Agent at its telephone number set forth herein.
DECEASED OWNER (JOINT TENANT) -- Copy of death certificate.
DECEASED OWNER (OTHERS) -- Copy of death certificate (see also
Executor/Administrator/Guardian below).
<PAGE> 172
EXECUTOR/ADMINISTRATOR/GUARDIAN -- Copy of court appointment documents for
executor or administrator; and (a) a copy of applicable provisions of the
will (title page, executor(s)' powers, asset distribution); or (b) estate
distribution documents.
ATTORNEY-IN-FACT -- Current power of attorney.
CORPORATION/PARTNERSHIP -- Corporate resolution(s) or other evidence of
authority to act. Partnership should furnish copy of the partnership
agreement.
TRUST/PENSION PLANS -- Unless the trustee(s) are named in the registration,
a copy of the cover page of the trust or pension plan, along with a copy of
the section(s) setting forth names and powers of trustee(s) and any
amendments to such sections or appointment of successor trustee(s).
4. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If consideration is to be issued
in the name of a person other than the person signing the Signature Box of
the Letter of Transmittal or if consideration is to be sent to someone
other than such signer or to an address other than that set forth on the
Letter of Transmittal in the box entitled "Description of Units Tendered,"
the appropriate boxes on the Letter of Transmittal should be completed.
5. TAX CERTIFICATIONS. Limited Partner(s) tendering Units to the Purchaser
pursuant to the Offer must furnish the Purchaser with the Limited Partner's
taxpayer identification number ("TIN") and certify as true, under penalties
of perjury, the representations in Box A, Box B and, if applicable, Box C.
By signing the Signature Box, the Limited Partner(s) certifies that the TIN
as printed (or corrected) on this Letter of Transmittal in the box entitled
"Description of Units Tendered" and the representations made in Box A, Box
B and, if applicable, Box C, are correct.
U.S. PERSONS. A Limited Partner that is a U.S. citizen OR a resident alien
individual, a domestic corporation, a domestic partnership, a domestic
trust or a domestic estate (collectively, "U.S. Persons"), as those terms
are defined in the Code, should follow the instructions below with respect
to certifying Box A and Box B.
BOX A -- SUBSTITUTE FORM W-9.
Part (i), Taxpayer Identification Number -- Tendering Limited Partners must
certify to the Purchaser the TIN printed (or corrected) on this Letter of
Transmittal in the box entitled "Description of Units Tendered." If a
correct TIN is not provided, penalties may be imposed by the Internal
Revenue Service (the "IRS"), in addition to the Limited Partner being
subject to backup withholding.
Part (ii), Backup Withholding -- In order to avoid 31% Federal income tax
backup withholding, the tendering Limited Partner must certify, under
penalties of perjury, that such Limited Partner is not subject to backup
withholding. Certain Limited Partners (including, among others, all
corporations and certain exempt non-profit organizations) are not subject
to backup withholding. Backup withholding is not an additional tax. If
withholding results in an overpayment of taxes, a refund may be obtained
from the IRS. DO NOT CHECK THE BOX IN BOX A, PART (II), UNLESS YOU HAVE
BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.
WHEN DETERMINING THE TIN TO BE FURNISHED, PLEASE REFER TO THE FOLLOWING AS
A GUIDE:
Individual accounts -- should reflect owner's TIN.
Joint accounts -- should reflect the TIN of the owner whose name appears
first.
Trust accounts -- should reflect the TIN assigned to the trust.
IRA custodial accounts -- should reflect the TIN of the custodian (not
necessary to provide).
Custodial accounts for the benefit of minors -- should reflect the TIN of
the minor.
Corporations, partnership or other business entities -- should reflect the
TIN assigned to that entity.
By signing the Signature Box, the Limited Partner(s) certifies that the TIN
as printed (or corrected) on the front of the Letter of Transmittal is
correct.
BOX B -- FIRPTA AFFIDAVIT -- Section 1445 of the Code requires that each
limited partner transferring interests in a partnership with real estate
assets meeting certain criteria certify under penalty of perjury the
representations made in Box B, or be subject to withholding of tax equal to
10% of the purchase price for interests purchased. Tax withheld under
Section 1445 of the Code is not an additional tax. If withholding results
in an overpayment of tax, a refund may be obtained from the IRS. PART (I)
SHOULD BE
<PAGE> 173
CHECKED ONLY IF THE TENDERING LIMITED PARTNER IS NOT A U.S. PERSON, AS
DESCRIBED THEREIN. CORPORATIONS SHOULD INSERT THE JURISDICTION OF
INCORPORATION IN THE BLANK PROVIDED IN PART (III).
BOX C -- FOREIGN PERSONS -- In order for a tendering Limited Partner who is
a Foreign Person (i.e., not a U.S. Person, as defined above) to qualify as
exempt from 31% backup withholding, such foreign Limited Partner must
certify, under penalties of perjury, the statement in Box C of this Letter
of Transmittal, attesting to that Foreign Person's status by checking the
box preceding such statement. UNLESS THE BOX IS CHECKED, SUCH LIMITED
PARTNER WILL BE SUBJECT TO 31% WITHHOLDING OF TAX UNDER SECTION 1445 OF THE
CODE.
6. CONDITIONAL TENDERS. No alternative, conditional or contingent tenders will
be accepted.
7. VALIDITY OF LETTER OF TRANSMITTAL. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of a Letter of
Transmittal and other required documents will be determined by the
Purchaser and such determination will be final and binding. The Purchaser's
interpretation of the terms and conditions of the Offer (including these
Instructions for this Letter of Transmittal) will be final and binding. The
Purchaser will have the right to waive any irregularities or conditions as
to the manner of tendering. Any irregularities in connection with tenders,
unless waived, must be cured within such time as the Purchaser shall
determine. This Letter of Transmittal will not be valid until any
irregularities have been cured or waived. Neither the Purchaser nor the
Information Agent are under any duty to give notification of defects in a
Letter of Transmittal and will incur no liability for failure to give such
notification.
8. ASSIGNEE STATUS. Assignees must provide documentation to the Information
Agent which demonstrates, to the satisfaction of the Purchaser, such
person's status as an assignee.
9. TRANSFER TAXES. Except as set forth in this Instruction 9, the Purchaser
will pay, or cause to be paid, all transfer taxes, if any, in respect of
the Unit(s) accepted for payment pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if tendered Units are
registered in the name of, any person other than the person signing the
Letter of Transmittal, the amount of any transfer taxes (whether imposed on
the registered holder or such person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
[10. MINIMUM TENDERS. A Limited Partnership may tender any or all of his or her
Units; provided, however, that because of restrictions in the Partnership's
Limited Partnership Agreement, a partial tender of Units must be for a
minimum of [five] Units (other than Limited Partners who hold Units in an
Individual Retirement Account or Keogh Plan). Tenders of fractional Units
will be permitted only by a Limited Partner who is tendering all Units
owned by that Limited Partner.]
<PAGE> 174
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
==========================================================
FOR THIS TYPE OF ACCOUNT: GIVE THE
TAXPAYER
IDENTIFICATION
NUMBER OF --
- ----------------------------------------------------------
<C> <S> <C>
1. An individual account. The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person(3)
7. a The usual revocable The grantor trustee(1)
savings trust account
(grantor is also trustee)
b So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>
==========================================================
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You may
use your social security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 175
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A futures commission merchant registered with the Commodity Futures Trading
Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to an appropriate nominee.
- Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852 of the Code).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments of mortgage interest to you.
- Payments made to an appropriate nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT
SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM
W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(A),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give correct taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is a clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 176
The Information Agent for the offer is:
River Oaks Partnership Services, Inc.
By Mail:
P.O. Box 2065
S. Hackensack, N.J. 07606-2065
By Overnight Courier:
111 Commerce Road
Carlstadt, N.J. 07072
Attn.: Reorganization Dept.
By Hand:
111 Commerce Road
Carlstadt, N.J. 07072
Attn.: Reorganization Dept.
By Telephone:
Toll Free (818) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 177
[LETTERHEAD OF AIMCO PROPERTIES, L.P.]
Dear Limited Partner:
We are offering to acquire your units of limited partnership interest in
. Our offer presents you with the following four options, which
you are free to accept or reject in any combination you like:
1. You may tender each of your units in exchange for of our
% Tax-Deferral Partnership Preferred Units. Generally, this exchange
may be made without recognizing any taxable gain on your units. After one
year, you may exchange, the Preferred Units for, at our option, either cash
or Preferred Stock or Class A Common Stock of Apartment Investment and
Management Company, ("AIMCO"). AIMCO is a real estate investment trust. We
are the partnership through which AIMCO conducts substantially all of its
operations. AIMCO's Class A Common Stock is listed, and its Preferred Stock
is expected to be listed, on the New York Stock Exchange.
2. You may tender each of your units in exchange for of our
Tax-Deferral Partnership Common Units. Generally, this exchange may also be
made without recognizing any taxable gain on your units. After one year,
you may exchange the Common Units for, at our option, either cash or shares
of AIMCO's Class A Common Stock, which is listed on the New York Stock
Exchange.
3. You may tender each of your units in exchange for $ in
cash, in which case you may recognize a gain or loss for federal income tax
purposes, on your units.
4. You may do nothing, retain your units and continue to participate
in gains, losses and distributions, if any, on your partnership units. If
you choose to retain your units, your rights as a holder of units will
remain unchanged.
We are offering to acquire no more than % of all outstanding units in
your partnership. You will not be required to pay any commissions or fees in
connection with any disposition of your units pursuant to our offer.
There are advantages and disadvantages to you of accepting or declining to
accept the offer. The terms of the offer are more fully described in the
enclosed materials. These documents describe the material risks and
opportunities associated with the offer, including certain tax considerations.
Please review these documents carefully. The general partner of your
partnership, which is an affiliate of ours, has substantial conflicts of
interest with respect to the offer. Accordingly, the general partner of your
partnership makes no recommendation to you as to whether you should tender or
refrain from tendering your units in the offer. We have retained Robert A.
Stanger & Co. to render an opinion as to the fairness of the offer consideration
from a financial point of view. A copy of such opinion is enclosed as Appendix A
to the enclosed Prospectus Supplement.
If you desire to tender any of your units in response to our offer, you
should complete and sign the enclosed letter of transmittal in accordance with
the enclosed instructions and mail or deliver the signed letter of transmittal
and any other required documents to River Oaks Partnership Services, Inc., which
is acting as the Information Agent in connection with our offer, at the address
set forth on the back cover of the enclosed Prospectus Supplement. The offer
will expire at 5:00 p.m. Denver, Colorado time on 1998, unless
extended. If you have questions or require further information, please call the
Information Agent, toll free, at (888) 349-2005.
Very truly yours,
AIMCO PROPERTIES, L.P.
<PAGE> 178
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES INCOME PROPERTIES, LTD. II
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $260.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $249.78 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few properties to holding an interest in
our large portfolio of properties. In the future, the properties owned by
your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 179
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Income Properties, Ltd. II................. S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounting Treatment......................... S-44
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-66
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
</TABLE>
i
<PAGE> 180
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-79
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-82
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 181
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Income Properties, Ltd. II. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 182
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid no distributions for the six months ended June 30,
1998, but subsequently paid a distribution of 14.88 per unit. We do not
expect your partnership to pay any further distributions during 1998. We
will pay fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
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THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $30.00 per unit to $177.00 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, your
general partner estimated the net asset value of your units to be $260.00
per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $249.78 per unit. However, we do not
believe that these valuations represent the current fair market value of
your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
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Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, if you tender less than
all of your units, you must continue to hold at least ten units following
our acceptance of tendered units. You may tender fractional units only if
you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 187
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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<PAGE> 188
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$260.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $249.78 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $30.00 per unit to $177.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
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<PAGE> 189
deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
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<PAGE> 190
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
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<PAGE> 191
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
13.3% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in significant amounts of
taxable income to you and your partners. Another option for liquidation of
your
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investment would be to sell your units in a private transaction. Any such
sale could be at a very substantial discount from your pro rata share of
the fair market value of your partnership's property and might involve
significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
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In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $30 to $177
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership is entitled to
receive an annual management fee equal to 10% of the Net Cash from Operations
(as defined in your partnership's agreement of limited partnership) for its
services as general partner of your partnership and also receives reimbursement
for expenses incurred in such capacity. The general partner of your partnership
received fees and reimbursement totaling $86,000 for the first six months of
1998. The property manager received management fees of $172,000 for the first
six months of 1998. We have no current intention of changing the fee structure
for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Income Properties, Ltd. II was organized on October 12, 1982, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital
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appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently includes the following three
residential apartment complexes: Deer Creek Apartments, a 288-unit complex in
Plainsboro, New Jersey; Georgetown Apartments, a 200-unit complex in South Bend,
Indiana; and Landmark Apartments, a 292-unit complex in Raleigh, North Carolina.
Additionally, your partnership's investment portfolio also includes a 100%
leasehold interest in Atlanta Crossing Shopping Center, a 169,168 square-foot
retail center in Montgomery, Alabama and a 14.4% interest in the Princeton
Meadows Joint Venture, which owns a golf course in Princeton, New Jersey. The
general partner of your partnership is Angeles Realty Corporation II, which is a
majority-owned subsidiary of AIMCO. Insignia Residential Group, L.P., which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
your partnership. As of August 1, 1998, there were 99,784 units of limited
partnership interest issued and outstanding, which were held of record by 3,320
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
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SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 201
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 202
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 203
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 204
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 205
SUMMARY FINANCIAL INFORMATION OF ANGELES INCOME PROPERTIES, LTD. II
The summary financial information of Angeles Income Properties, Ltd. II for
the six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Angeles Income Properties, Ltd. II for the years ended December
31, 1997, 1996, and 1995 is based on audited financial statements. This
information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
ANGELES INCOME PROPERTIES, LTD. II
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
---------------------------- -----------------------------------
1998 1997 1997 1996 1995
------------ ------------ --------- --------- ---------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.................................... $ 3,711 $ 3,598 $ 7,261 $ 6,868 $ 8,378
Net Income/(Loss)................................. 202 190 145 (270) 853
Net income per limited partnership unit........... 2.00 1.88 1.44 (2.68) 14.06
------- ------- ------- ------- -------
Distribution per limited partnership unit......... -- 9.92 9.92 -- --
------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------------------- -----------------------------------
1998 1997 1997 1996 1995
------------ ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation...... $11,038 $11,603 $11,338 $12,065 $13,257
Total Assets...................................... 16,800 17,011 16,868 17,858 16,370
Mortgage Notes Payable............................ 18,100 18,290 18,197 18,375 16,723
Partners' Capital/(Deficit)....................... (2,027) (2,184) (2,229) (1,374) (1,104)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING ANGELES INCOME
PARTNERSHIP PROPERTIES, LTD. II
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $ 0.00(1) $9.92
</TABLE>
- ---------------
(1) Your partnership subsequently paid a distribution of $14.88 per unit.
S-25
<PAGE> 206
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $30.00 per unit to
$177.00 per unit from January 1, 1997 to September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$260.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $249.98 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 207
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
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RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. Your partnership paid no distributions
with respect to your units for the six months ended June 30, 1998 but
subsequently paid a distribution of 14.88 per unit. We do not expect your
partnership to pay any further distributions during 1998. This is equivalent to
distributions of $ per year on the number of tax-deferral %
Preferred OP Units, or distributions of $ per year on the number of tax
deferral Common OP Units, that you would receive in exchange for each of your
partnership's units. Therefore, distributions with respect to the Preferred OP
Units and Common OP Units that we are offering are expected to be ,
immediately following our offer, than the distributions with respect to your
units. See "Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
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RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Residential Group,
L.P., which manages the properties owned by your partnership. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 13.3%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
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One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. On August 13, 1998, IPT, then an affiliate of
Insignia and now our affiliate, commenced a tender offer to acquire units at a
cash purchase price of $175.00 per unit.
Prior to such tender offer, on August 7, 1998, Madison Partnership
Liquidity Investors 64, LLC ("Madison"), which was unaffiliated with Insignia
and is not affiliated with AIMCO, commenced a tender offer for $130.00 per unit.
Prior to the tender offer by Madison, IPT commenced a tender offer for
$160.00 per unit and purchased 8,908 units in June 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
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Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, if you tender less than all of your units, you must continue to hold at
least ten units following our acceptance of tendered units. You may tender
fractional units only if you are tendering all of your units. No alternative,
conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 6,262 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 6.3% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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received by you pursuant to the offer (i.e., the sum of the numerator of
such fraction plus the fair market value of the OP Units received by you
pursuant to the offer). The transfer by you of the remaining portion of such
units will generally be treated as a tax-free contribution. At the time of
transfer, the adjusted tax basis of the transferred units is allocated between
the portion of the units deemed sold and the remaining portion of the units
deemed contributed on the basis of each such portion's respective fair market
value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized pursuant to the offer will exceed the
cash proceeds realized upon the sale of such unit. The initial adjusted tax
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basis of the OP Units received by you in exchange for your units pursuant
to the offer will be equal to (i) the sum of your adjusted tax basis in such
transferred units plus any gain recognized in the exchange and reduced by (ii)
cash received or deemed received in the exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Deer Creek Apartments.............. $ % $
Georgetown Apartments..............
Landmark Apartments................
Atlanta Crossing Shopping Center...
Princeton Meadows Joint Venture
(14.4% interest).................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other
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costs including required capital expenditures and deferred maintenance to derive
a net equity value for your partnership of $ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. Your partnership paid no distributions with
respect to your units for the six months ended June 30, 1998 but
subsequently paid a distribution of $14.88 per unit. We do not expect your
partnership to pay any further distributions during 1998. This is
equivalent to distributions of $ per year on the number of
tax-deferral % Preferred OP Units, or distributions of $ per
year on the number of tax deferral Common OP Units, that you would receive
in exchange for each of your partnership's units. Therefore, distributions
with respect to the Preferred OP Units and Common OP Units that we are
offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership
of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating
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Partnership and are not the result of arms-length negotiations. See
"Conflicts of Interest." The general partner of your partnership and the AIMCO
Operating Partnership believe that the valuation method described in "Valuation
of Units" provides a meaningful indication of value for residential apartment
properties although there are other ways to value real estate. A liquidation in
the future might generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
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apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $30.00 to $177.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 16,547 units (representing approximately
16.6% of the total outstanding units) was transferred (excluding units
transferred by Insignia to IPLP in February 1998 and in tender offers) in sale
transactions. Set forth in the table below are the high and low sales prices of
units for the quarterly periods from January 1, 1996 to September 30, 1998, as
reported by the general partner and by The Partnership Spectrum, which is an
independent, third-party source. The gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices;
thus the AIMCO Operating Partnership does not know whether the information
compiled by The Partnership Spectrum is accurate or complete. The transfer
paperwork submitted to the general partner often does not include the requested
price information or contains conflicting information as to the actual sales
price. Accordingly, you should not rely upon this information as being
completely accurate.
ANGELES INCOME PROPERTIES, LTD. II
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $ 75.00 $177.00 (c) (c)
Second Quarter.................................. 30.00 156.30 $120.00 $153.00
First Quarter................................... 80.00 144.00 130.00 131.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 76.00 147.00 80.00 135.00
Third Quarter................................... 70.00 145.00 115.00 145.00
Second Quarter.................................. 30.00 143.00 110.00 135.00
First Quarter................................... 30.00 125.00 100.00 127.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 10.00 122.00 80.00 122.00
Third Quarter................................... 38.70 110.00 71.00 112.00
Second Quarter.................................. 24.00 140.00 -- --
First Quarter................................... 15.00 62.00 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the
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<PAGE> 233
first day of each month. The prices in the table are based solely on
information provided to the general partner by sellers and buyers of units
transferred in sale transactions (i.e., excluding transactions believed to
result from the death of a limited partner, rollover to an IRA account,
establishment of a trust, trustee to trustee transfers, termination of a
benefit plan, distributions from a qualified or non-qualified plan, uniform
gifts, abandonment of units or similar non-sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Each of your partnership's wholly-owned properties was
appraised in 1998, 1997 and 1996 by an independent, third party appraiser,
Koeppel Tener Real Estate Services, Inc. (the "Appraiser"). According to each
appraisal report, the scope of the appraisal included an inspection of the
property and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the Appraisal Standards
set forth in the Financial Institutions Reform, Recovery and Enforcement Act of
1989
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<PAGE> 234
(known as "FIRREA"). The estimated market value of the fee simple estates of
each property specified in those appraisal reports is as listed in the chart
below. A copy of the summary of the appraisal has been filed as an exhibit to
the AIMCO Operating Partnership's Tender Offer Statement on Schedule 14D-1 filed
with the SEC. Independent appraisals have not been conducted for any of the
partnership's other property interests in the past three years.
<TABLE>
<CAPTION>
PROPERTY NAME 1998 1997 1996
------------- ----------- ----------- -----------
<S> <C> <C> <C>
Deer Creek Apartments............... $12,200,000 $12,000,000 $11,000,000
Georgetown Apartments............... 8,500,000 7,500,000 7,200,000
Landmark Apartments................. 13,500,000 13,300,000 11,500,000
Atlanta Crossing Shopping Center.... 5,100,000 4,700,000 4,750,000
</TABLE>
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $260.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $213.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
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<PAGE> 235
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
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<PAGE> 236
similar properties; (viii) reviewed internal financial analyses and forecasts
prepared by your partnership of the estimated current net liquidation value of
your partnership; (ix) reviewed information provided by AIMCO concerning the
AIMCO Operating Partnership, the Common OP Units and the Preferred OP Units; (x)
reviewed available trading information for the units; and (xi) conducted other
studies, analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
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<PAGE> 237
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
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<PAGE> 238
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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<PAGE> 239
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2037. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests in conduct any business that may be lawfully conducted by
residential, commercial and industrial real properties a limited partnership organized pursuant to the
either directly or indirectly through partnership or Delaware Revised Uniform Limited Partnership Act (as
joint ventures with others. Subject to restrictions amended from time to time, or any successor to such
contained in your partnership's agreement of limited statute) (the "Delaware Limited Partnership Act"),
partnership, your partnership may perform all acts provided that such business is to be conducted in a
necessary, advisable or convenient to the business of manner that permits AIMCO to be qualified as a REIT,
your partnership including borrowing money and creating unless AIMCO ceases to qualify as a REIT. The AIMCO
liens. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 240
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner, in its sold discretion, may make contributions as may be established by the general
subsequent offerings of your partnership's securities, partner in its sole discretion. The net capital
including offerings of additional units and limited contribution need not be equal for all OP Unitholders.
partnership interests. The capital contribution need No action or consent by the OP Unitholders is required
not be equal for all limited partners and no action or in connection with the admission of any additional OP
consent is required in connection with the admission of Unitholder. See "Description of OP Units -- Management
any additional limited partners. The general partner by the AIMCO GP" in the accompanying Prospectus.
may not issue units in exchange for property. Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. The general partner may entities in which it is or thereby becomes a
not purchase or lease any real property from your participant upon such terms and subject to such
partnership or sell or lease any real property to your conditions consistent with the AIMCO Operating Part-
partnership either directly or through an affiliate. nership Agreement and applicable law as the general
However, the general partner or an affiliate may partner, in its sole and absolute discretion, believes
purchase property in its own name and temporarily hold to be advisable. Except as expressly permitted by the
title thereto for the purpose of facilitating its AIMCO Operating Partnership Agreement, neither the
acquisition or financing by your partnership if (1) the general partner nor any of its affiliates may sell,
property is purchased by your partnership for a price transfer or convey any property to the AIMCO Operating
no greater than the cost of the property to the general Partnership, directly or indirectly, except pursuant to
partner or its affiliate, (2) no difference exists in transactions that are determined by the general partner
the interest rates of the loans secured by the property in good faith to be fair and reasonable.
at the time acquired by the general partner or its
affiliates and at the time acquired by your partnership
and (3) neither the general partner nor its affiliates
receive any economic advantage by reason of holding or
having held title to the property. Your partnership may
also lease property to a partnership sponsored by the
general partner or its affiliates so long as the terms
of the lease are comparable to, or no less favorable to
your partnership than those offered to and accepted by
unrelated persons for comparable space and contained in
a written contract which precisely describes the
subject matter thereof and all compensation to be paid,
which contract, if not previously disclosed, must be
fully and properly disclosed to all partners. Subject
to certain conditions contained in your partnership's
agreement of limited partnership, your partnership may
invest the assets of your partnership in entities
affiliated with the general partner of your
partnership. Your partnership may not make loans to the
general partner or its affiliates but the general
partner and its affiliates may lend money to your
partnership provided that the interest and other
financing
</TABLE>
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<TABLE>
<S> <C>
charges on loans to your partnership may not be in
excess of rates and charges which would be charged by
unrelated banks in a competitive position or in any
event in excess of the prime interest rate that is
charged from time to time by Bank of America National
Trust and Savings Association , Los Angeles, California
on 90-day unsecured loans to responsible and
substantial commercial borrowers. In addition, an
affiliate of your general partner may lend money to
your partnership to fund its acquisitions if your
partnership does not have sufficient cash proceed to
invest so long as: (1) such loan is made at interest
rates and charges not in excess of the rates and
charges then currently being paid by the lender for the
borrowed funds, but in no event may the interest rate
and charges exceed the interest rate and charges which
would be charged by unrelated banks in a competitive
position or in any event in excess of the prime
interest rate that is charged from time to time by Bank
of America National Trust and Savings Association, Los
Angeles, California on 90-day unsecured loans to re-
sponsible and substantial commercial borrowers, (2)
your partnership agrees to repay promptly such loan
from the offering of units, but in no event later than
one year from the date of purchase of the property, (3)
such interim financing is not in an amount that exceeds
80% of the purchase price of the property and (4) the
affiliate of the general partner agrees to purchase the
property, as promptly as practical from your
partnership at a price equal to the cost of the
property to your partnership in the event that your
partnership is unable to make sufficient payments to
repay the loan for any reason. Unless certain
conditions are met, the general partner may not make a
permanent loan to your partnership nor may your
partnership finance the purchase of your partnership's
property by use of a "wrap-around" or "all-inclusive"
note and mortgage or deed of trust under which the
general partner or any of its affiliates are the
obligee or secured party. Your partnership may not
grant to the general partner or its affiliates an
exclusive right or an exclusive employment to sell your
partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
Subject to the provisions of your partnership's The AIMCO Operating Partnership Agreement contains no
agreement of limited partnership, the general partner restrictions on borrowings, and the general partner has
of your partnership is authorized to borrow money and full power and authority to borrow money on behalf of
to secure such debt by mortgage, pledge or other lien the AIMCO Operating Partnership. The AIMCO Operating
on any of the assets of your partnership. The general Partnership has credit agreements that restrict, among
partner of your partnership may not, in connection with other things, its ability to incur indebtedness. See
the acquisition of properties subject the properties "Risk Factors -- Risks of Significant Indebtedness" in
acquired by your partnership to one or more mortgages, the accompanying Prospectus.
deeds of trust or other security interest; provided,
however, that your partnership will be permitted to
acquire a property subject to existing secured financ-
ing so long as the outstanding balance of such mortgage
indebtedness assumed by your partnership does not
exceed 40% of the purchase price of the property and
may borrow money from third parties if it does not have
sufficient funds if certain conditions are met. Your
partnership may not acquire any real property which, at
the date of acquisition, is subject to indebtedness
secured by a mortgage, deed of trust or other security
interest on the real property having an unpaid balance
immediately after the acquisition equal to more than
40% of the purchase price of the real property or
refinance any property by incurring indebtedness in
excess of 40% of the then appraised value of the
property for the first twelve months after purchase or
80% thereafter. The general partner may not acquire a
property subject to or subject a property to finance
which represents 10% of more of the purchase price
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
which contains a provision of a balloon payment due and
payable prior to the earlier of (1) ten years from the
date your partnership acquires the property, or the
inception of the loan, whichever is later or (2) two
years beyond the estimated holding period for the
property, but in no event prior to seven years from the
date of acquisition of the property or the inception of
the loan, whichever is later. Your partnership may not
issue debt securities to the public. No creditor who
makes a non-recourse loan to your partnership will have
or acquire at any time, as a result of making such
loan, any direct or indirect interest in the profits,
capital or property of your partnership, other than as
a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, and California law, the general management power over the business and affairs of the
partner has the right, power and authority, on behalf AIMCO Operating Partnership. The OP Unitholders have
of your partnership, and in its name, to exercise all the right to vote on certain matters described under
of the rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without approval of the limited partners. Units -- Voting Rights" below. The general partner may
Limited partners have no right to participate in the not be removed by the OP Unitholders with or without
management or conduct of your partnership's business or cause.
affairs nor any power or authority to act for or on
behalf of our partnership in any respect whatsoever. In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interest of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. As any such indemnity provided all losses, claims, damages, liabilities, joint or
will be paid, from and only to the extent of, several, expenses (including legal fees), fines,
partnership assets. In the event that a claim for settlements and other amounts incurred in connection
indemnification against liabilities arising under the with any actions relating to the operations of the
Securities Act of 1933, as amended (other than for the AIMCO Operating Partnership, as set forth in the AIMCO
payment by your partnership of expenses incurred or Operating Partnership Agreement. The Delaware Limited
paid by the general partner in the successful defense Partnership Act provides that subject to the standards
of any action, suit or proceeding) is asserted by the and restrictions, if any, set forth in its partnership
general partner in connection with the units, your agreement, a limited partnership may, and shall have
partnership will, unless in the opinion of its counsel the power to, indemnify and hold harmless any partner
the matter is settled by controlling precedent, submit or other person from and against any and all claims and
to a court of appropriate jurisdiction the question of demands whatsoever. It is the position of the
whether such indemnification by it is against public Securities and Exchange Commission that indemnification
policy as expressed in the Securities Act of 1933, as of directors and officers for liabilities arising under
amended and will inform the court of the position of the Securities Act is against public policy and is
the SEC with respect to such indemnification. Your unenforceable pursuant to Section 14 of the Securities
partnership has agreed to be governed by the court's Act of 1933.
final adjudication of such issue.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner, the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership and such other conditions as are controlling interest in the AIMCO Operating Partner-
set forth in your partnership's agreement of limited ship. Additionally, the AIMCO Operating Partnership
partnership are satisfied. The general partner may Agreement contains restrictions on the ability of OP
admit additional general partners without the consent Unitholders to transfer their OP Units. See
of the limited partners. No limited partner may "Description of OP Units -- Transfers and Withdrawals"
substitute a transferee of his units in such limited in the accompanying Prospectus.
partner's place without the consent of the general
partner which may be withheld at the sole discretion of
the general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership, (3) deletes or adds any provision required the OP Unitholders. The general partner will seek the
by any applicable law, (4) reflects any reduction of written consent of the OP Unitholders on the proposed
the partners' capital accounts or (5) reflects a change amendment or will call a meeting to vote thereon. See
in the name or the location of the principal place of "Description of OP Units -- Amendment of the AIMCO
business of your partnership. Your partnership's agree- Operating Partnership Agreement" in the accompanying
ment of limited partnership may not be amended to Prospectus.
change your partnership to a general partnership,
extend the term or your
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partnership, allow the expulsion of the non-managing
general partner without the simultaneous expulsion of
the managing general partner or change the liability of
the general partner or the limited partners. All other
amendments to your partnership's agreement of limited
partnership must be approved by the limited partners
owning more than 50% of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership is entitled to The general partner does not receive compensation for
receive an annual management fee equal to 10% of the its services as general partner of the AIMCO Operating
Net Cash from Operations for its services as general Partnership. However, the general partner is entitled
partner of your partnership and may also receive to payments, allocations and distributions in its
reimbursement for expenses incurred in such capacity. capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for the negligence, no OP Unitholder has personal liability for
debts, liabilities, or obligations of your partnership the AIMCO Operating Partnership's debts and
in excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner may delegate any or all of its powers, rights Operating Partnership Agreement expressly limits the
and obligations under your partnership's agreement of liability of the general partner by providing that the
limited partners and in furtherance of any such general partner, and its officers and directors
delegation may appoint, employ or
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
contract with any person for the account of your will not be liable or accountable in damages to the
partnership for the transaction of the business of your AIMCO Operating Partnership, the limited partners or
partnership, which person may, under the supervision of assignees for errors in judgment or mistakes of fact or
the general partner, perform such acts or services for law or of any act or omission if the general partner or
your partnership as the general partnership may such director or officer acted in good faith. See
approve. The general partner and its affiliates may "Description of OP Units -- Fiduciary Responsibilities"
acquire real properties for their own account, or in the accompanying Prospectus.
engage in the acquisition, development, operation or
management of real estate on behalf of other entities,
including business ventures similar to, related to or
in direct or indirect competition with any business of
your partnership. However, the general partner and its
affiliates will, if your partnership has funds
available for investment, grant a right of first
refusal to your partnership for those real property
investment opportunities which meet your partnership's
investment objectives and policies before they acquire
these properties for their own accounts. Neither your
partnership nor any other partner will have any right
in or to such other business ventures of the income or
profits derived therefrom.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
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COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Operating
Partnership for working capital and
new investments rather than being
distributed to the OP Unitholders
(including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner and ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership. holders of at least 50% of the
outstanding Preferred OP Units will Under the AIMCO Operating Partner-
A general partner may cause the be necessary for effecting any ship Agreement, the general partner
dissolution of your partnership by amendment of any of the provisions has the power to effect the
retiring. In such event, your of the Partnership Unit Desig- acquisition, sale, transfer,
partnership may be continued by the nation of the Preferred OP Units exchange or other disposition of
remaining general partner if, in that materially and adversely any assets of the AIMCO Operating
the opinion of counsel to your affects the rights or preferences Partnership (including, but not
partnership, such election would of the holders of the Preferred OP limited to, the exercise or grant
not jeopardize your partnership's Units. The creation or issuance of of any conversion, option,
status as a partnership for tax any class or series of partnership privilege or subscription right or
purposes. If no general partner units, including, without any other right available in
remains, your partnership may limitation, any partnership units connection with any assets at any
continue if, within ninety days of that may have rights senior or time held by the AIMCO Operating
the retirement, the limited superior to the Preferred OP Units, Partnership) or the merger,
partners holding more than 50% of shall not be deemed to materially consolidation, reorganization or
the units elect a substitute adversely affect the rights or other combination of the AIMCO
general partner who is willing to preferences of the holders of Operating Partnership with or into
continue your partnership. Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as de-
fined in the Delaware Limited
Partnership Act, agree in writing,
in their sole and
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
absolute discretion, to continue
the business of the AIMCO Operating
Partnership and to the appointment
of a successor general partner. The
general partner may elect to
dissolve the AIMCO Operating
Partnership in its sole and
absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re-
</TABLE>
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<PAGE> 248
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
deemed, purchased or otherwise "Description of OP
acquired for consideration, nor Units -- Distributions" in the
shall any other cash or other accompanying Prospectus.
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
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A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fraction unit and if on any securities exchange. The transferability of the OP Units.
such assignment is less than all of Preferred OP Units are subject to Until the expiration of one year
the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least ten Partnership Agreement. subject to certain exceptions, such
units, except in certain circum- OP Unitholder may not transfer all
stances, (2) the assignee and the Pursuant to the AIMCO Operating or any portion of its OP Units to
assignor execute, acknowledge and Partnership Agreement, until the any transferee without the consent
deliver to the general partner a expiration of one year from the of the general partner, which
written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignment taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any person, subject to
your partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor without the consent of the general conditions specified in the AIMCO
receives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have complied with discretion. After the expiration of right of first refusal. See
such other conditions as determined one year, such holders of Preferred "Description of OP Units --
by the general partner to comply OP Units has the right to transfer Transfers and Withdrawals" in the
with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to any person, subject to
transferee may be substituted as a the satisfaction of certain After the first anniversary of
limited partner if: (1) the general conditions specified in the AIMCO becoming a holder of Common OP
partner consents in writing, which Operating Partnership Agreement, Units, an OP Unitholder has the
consent may be granted or denied in including the general partner's right, subject to the terms and
the sole discretion of the general right of first refusal. conditions of the AIMCO Operating
partner, (2) the transferor elects Partnership Agreement, to require
to become a substitute limited After a one-year holding period, a the AIMCO Operating Partnership to
partner by delivering to the holder may redeem Preferred OP redeem all or a portion of the
general partner a written notice, Units and receive in exchange Common OP Units held by such party
executed and acknowledged by the therefor, at the AIMCO Operating in exchange for a cash amount based
assignor and assignee of such Partnership's option, (i) subject on the value of shares of Class A
election, (3) the assignee executes to the terms of any Senior Units, Common Stock. See "Description of
and acknowledges such other cash in an amount equal to the OP Units -- Redemption Rights" in
instruments that the general Liquidation Preference of the the accompanying Prospectus. Upon
partner may require including an Preferred OP Units tendered for receipt of a notice of redemption,
adoption of your partnerships's redemption, (ii) a number of shares the AIMCO Operating Partnership
agreement of limited partnership, of Class I Cumulative Preferred may, in its sole and absolute
and (4) assignee pays the Stock of AIMCO that pay an discretion but subject to the
partnership for its expenses aggregate amount of dividends yield restrictions on the ownership of
incurred in the transaction. equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
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Voting Rights
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Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to 10%
of your partnership's net cash from operations for its services as general
partner of your partnership and also receives reimbursement for expenses
incurred in such capacity. The general partner of your partnership received fees
and reimbursement totalling $217,000 in 1996, $229,000 in 1997 and $86,000 for
the first six months of 1998. The property manager received management fees of
$322,000 in 1996, $335,000 in 1997 and $172,000 for the first six months of
1998. The AIMCO Operating Partnership has no current intention of changing the
fee structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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YOUR PARTNERSHIP
GENERAL
Angeles Income Properties, Ltd. II was organized on October 12, 1982, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently includes the following three
residential apartment complexes: Deer Creek Apartments, a 288-unit complex in
Plainsboro, New Jersey; Georgetown Apartments, a 200-unit complex in South Bend,
Indiana; and Landmark Apartments, a 292-unit complex in Raleigh, North Carolina.
Additionally, your partnership's investment portfolio also includes a 100%
leasehold interest in Atlanta Crossing Shopping Center, a 169,168 square-foot
retail center in Montgomery, Alabama and a 14.4% interest in the Princeton
Meadows Joint Venture, which owns a golf course in Princeton, New Jersey. The
general partner of your partnership is Angeles Realty Corporation II, which is a
majority-owned subsidiary of AIMCO. Insignia Residential Group, L.P., which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
your partnership. As of August 1, 1998, there were 99,784 units of limited
partnership interest issued and outstanding, which were held of record by 3,320
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated March 31, 1983, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner had begun selling
their properties "at different time periods" after the investments were made.
The prospectus further stated, however, that the general partner was unable to
predict how long the partnership would remain invested in the properties and
that the partnership acquired such properties for investment rather than resale.
In any event, according to the prospectus, the general partner anticipated that
a disposition of the properties would depend on, among other things, the current
real estate and money markets, economic climate and income tax consequences to
the limited partners. Under your partnership's agreement of limited partnership,
the term of the partnership will continue until December 31, 2037, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to
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<PAGE> 259
liquidate the partnership or amending the agreement of limited partnership
to authorize limited partners to cause the partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In the event that a claim for indemnification against liabilities
arising under the Securities Act of 1933, as amended (other than for the payment
by your partnership of expenses incurred or paid by the general partner in the
successful defense of any action, suit or proceeding) is asserted by the general
partner in connection with the units, your partnership will, unless in the
opinion of its counsel the matter is settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act of 1933, as
amended and will inform the court of the position of the SEC with respect to
such indemnification. Your partnership has agreed to be governed by the court's
final adjudication of such issue.
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Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $500.00.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 0.00
January 1, 1996 - December 31, 1996......................... 0.00
January 1, 1997 - December 31, 1997......................... 9.92
January 1, 1998 - June 30, 1998............................. 0.00
Subsequent to June 30, 1998................................. 14.88
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 13.3% interest in your partnership, including 12,858 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received reimbursement for expenses
in respect of its capacity as general partner of your partnership as described
in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $396,160
1995........................................................ 261,210
1996........................................................ 217,000
1997........................................................ 229,000
1998 (through June 30)...................................... 86,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $348,202
1995........................................................ 326,338
1996........................................................ 322,000
1997........................................................ 335,000
1998 (through June 30)...................................... 172,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
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SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
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LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Income Properties, Ltd. II
appearing in Angeles Income Properties, Ltd. II Annual Report (Form 10-KSB) for
the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
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<PAGE> 264
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 265
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 266
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 267
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 268
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 269
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 270
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 271
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 272
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES INCOME PROPERTIES, LTD. III
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $124.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $122.18 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in two properties to holding an interest in our
large portfolio of properties. In the future, the properties owned by
your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 273
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Income Properties, Ltd. III................ S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-54
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-56
Assumptions, Limitations and
Qualifications............................. S-56
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-66
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
</TABLE>
i
<PAGE> 274
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-79
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-81
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 275
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Income Properties, Ltd. III. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 276
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 277
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $2.85 per unit for the six months
ended June 30, 1998, but is not expected to make any further distributions
in 1998. We will pay fixed quarterly distributions of $ per
unit on the Tax-Deferral % Preferred OP Units before any distributions
are paid to holders of Tax-Deferral Common OP Units. We pay quarterly
distributions on the Tax-Deferral Common OP Units based on our funds from
operations for that quarter. For the six months ended June 30, 1998, we
paid distributions of $1.125 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). This is equivalent to
distributions of $ per year on the number of Tax-Deferral %
Preferred OP Units, or $ per year on the number of Tax-Deferral Common
OP Units, that you would receive in an exchange for each of your
partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in two properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 278
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $20.00 per unit to $186.07 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, your
general partner estimated the net asset value of your units to be $124.00
per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $122.18 per unit. However, we do not
believe that these valuations represent the current fair market value of
your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 279
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, if you tender less than
all of your units, you must continue to hold at least ten units following
our acceptance of tendered units. You may tender fractional units only if
you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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<PAGE> 280
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 281
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 282
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$124.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $122.18 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $20.00 per unit to $185.07 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
S-8
<PAGE> 283
deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages two
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence
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on matters affecting the operation of the AIMCO Operating Partnership and third
parties may find it difficult to attempt to gain control or influence the
activities of our operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although
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these agreements provide us with some protection against rising interest rates,
these agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
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POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
0.51% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such
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assets would be valued through negotiations with prospective purchasers.
However, a liquidating sale of your partnership's property would be a
taxable event for you and your partners and could result in significant
amounts of taxable income to you and your partners. Another option for
liquidation of your investment would be to sell your units in a private
transaction. Any such sale could be at a very substantial discount from
your pro rata share of the fair market value of your partnership's property
and might involve significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
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- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
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Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
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In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $20.00 to $186.07
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 292
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership is entitled to
receive an annual management fee equal to 10% of the Net Cash from Operations
for each year for its services as general partner of your partnership and may
also receive reimbursement for expenses incurred in such capacity. The general
partner of your partnership received total fees and reimbursements of $48,000
for the first six months of 1998. The property manager received management fees
of $35,000 for the first six months of 1998. We have no current intention of
changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Income Properties, Ltd. III was organized on May 26, 1983, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital
S-18
<PAGE> 293
appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently includes the following two
properties: Lake Forest Apartments, a 136-unit complex in Brandon, Mississippi;
and Poplar Square Shopping Center, a 118,474 square-foot commercial complex in
Medford, Oregon. The general partner of your partnership is Angeles Realty
Corporation II, which is a majority-owned subsidiary of AIMCO. Insignia
Residential Group, L.P., which is a majority-owned subsidiary of AIMCO, serves
as manager of the properties owned by your partnership. As of September 15, 1998
there were 86,778 units of limited partnership interest issued and outstanding,
which were held of record by 3,412 limited partners. Your partnership's
principal executive offices are located at 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222, and its telephone number at that address is (303)
757-8101. For additional information about your partnership, please refer to the
annual and quarterly reports prepared by your partnership which accompany this
Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 294
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995 and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income............... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses......... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (161) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income....................... 11,350 1,341 8,676 523 658 123
Interest expense...................... (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (516) (565) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (4,681) (379) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 5,609 (86) 4,636 -- -- --
Amortization of goodwill.............. (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,526 -- 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 210 107 147 94 56 48
Total owned apartment units (end of
period)............................. 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities............................ (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
Predecessors(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income............... $ 5,805 $ 8,056
Property operating expenses........... (2,263) (3,200)
Owned property management expenses.... -- --
Depreciation.......................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 6,533 8,069
Management and other expenses......... (5,823) (6,414)
Corporate overhead allocation......... -- --
Other assets, depreciation and
amortization........................ (146) (204)
Owner and seller bonuses.............. (204) (468)
Amortization of management company
goodwill............................ -- --
------- --------
360 983
Minority interests in service company
business............................ -- --
------- --------
Company's shares of income from
service company business............ 360 983
------- --------
General and administrative expenses... -- --
Interest income....................... -- --
Interest expense...................... (4,214) (3,510)
Minority interest in other
partnerships........................ -- --
Equity in losses of unconsolidated
partnerships(c)..................... -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... -- --
Amortization of goodwill.............. -- --
------- --------
Income from operations................ (1,463) 627
Gain on disposition of properties..... -- --
Provision for income taxes............ (36) (336)
------- --------
Income (loss) before extraordinary
item................................ (1,499) 291
Extraordinary item -- early
extinguishment of debt.............. -- --
------- --------
Net income (loss)..................... $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 4 4
Total owned apartment units (end of
period)............................. 1,711 1,711
Units under management (end of
period)............................. 29,343 28,422
Basic earnings per Common OP Unit..... N/A N/A
Diluted earnings per Common OP Unit... N/A N/A
Distributions paid per Common OP
Unit................................ N/A N/A
Cash flows provided by operating
activities.......................... 2,678 2,203
Cash flows used in investing
activities............................ (924) (16,352)
</TABLE>
S-20
<PAGE> 295
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities.................. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)................ 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common OP
Units outstanding..................... 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets............................ 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
Predecessors(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities.................. $(1,032) $ 14,114
Funds from operations(e)................ N/A N/A
Weighted average number of Common OP
Units outstanding..................... N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation.......................... 33,270 33,701
Total assets............................ 39,042 38,914
Total mortgages and notes payable....... 40,873 41,893
Redeemable Partnership Units............ -- --
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- --
Partners' Capital....................... (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 296
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 297
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 298
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
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SUMMARY FINANCIAL INFORMATION OF ANGELES INCOME PROPERTIES, LTD. III
The summary financial information of Angeles Income Properties, Ltd. III
for the six months ended June 30, 1998 and 1997 is unaudited. The summary
financial information for Angeles Income Properties, Ltd. III for the years
ended December 31, 1997 and 1996 and 1995 is based on audited financial
statements. This information should be read in conjunction with such financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" incorporated by
reference herein.
ANGELES INCOME PROPERTIES, LTD. III
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------- --------------------------
1998 1997 1997 1996 1995
-------- -------- ------ ------- -------
(IN THOUSANDS EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues................................... $ 917 $ 922 $1,888 $ 1,772 $ 2,262
Net Income/(Loss)................................ (24) 6,844 6,738 (1,075) 224
Net income per limited partnership unit.......... (0.28) 78.08 76.87 (12.26) 2.56
------ ------ ------ ------- -------
Distributions per limited partnership unit....... 2.85 -- 15.43 -- --
------ ------ ------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------- --------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation..... $4,921 $5,456 $5,235 $ 5,578 $ 6,062
Total Assets..................................... 6,724 8,563 7,058 7,632 8,305
Mortgage Notes Payable, including Accrued
Interest....................................... 3,733 3,777 3,755 3,797 3,447
Partners' Capital/(Deficit)...................... 2,862 4,594 2,888 (2,250) (1,175)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING ANGELES INCOME PROPERTIES,
PARTNERSHIP LTD. III
------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding..... $1.125 $1.85 $2.85 $15.43
</TABLE>
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THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $20.00 per unit to
$186.07 per unit from January 1, 1997 to September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$124.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $122.18 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
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<PAGE> 301
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
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<PAGE> 302
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages two properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Distributions with respect to your units for the
six months ended June 30, 1998 were $2.85 per unit. We do not expect your
partnership to pay any further distributions with respect to your units in 1998.
Anticipated annualized distributions with respect to the Preferred OP Units are
$ and current annualized distributions with respect to the Common OP Units
are $2.25. This is equivalent to distributions of $ per year on the number
of tax-deferral % Preferred OP Units, or distributions of $ per
year on the number of tax deferral Common OP Units, that you would receive in
exchange for each of your partnership's units. Therefore, distributions with
respect to the Preferred OP Units and Common OP Units that we are offering are
expected to be , immediately following our offer, than the distributions
with respect to your units. See "Comparison of Ownership of Your Units and AIMCO
OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
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<PAGE> 303
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Residential Group,
L.P., which manages the properties owned by your partnership. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 0.51%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
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<PAGE> 304
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In August 1998, an affiliate of IPT, then an
affiliate of Insignia and now our affiliate, commenced a tender offer pursuant
to which it acquired units (representing approximately % of the
number outstanding) at a cash purchase price of $75.00 per unit on ,
1998.
Prior to such tender offer, Madison Partnership Liquidity Investors 64,
LLC, which was unaffiliated with Insignia and is not affiliated with AIMCO,
commenced a tender offer for $35.00 per unit and purchased shares in
, 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
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<PAGE> 305
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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<PAGE> 306
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 307
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, if you tender less than all of your units, you must continue to hold at
least ten units following our acceptance of tendered units. You may tender
fractional units only if you are tendering all of your units. No alternative,
conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 3,479 units in your
partnership have been transferred during the twelve months ending December 31,
1997 (representing approximately 4.01% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer was filed on behalf of the defendants
on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Lake Forest Apartments..................... $ % $
Poplar Square Shopping Center..............
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Distributions with respect to your units for the six months ended
June 30, 1998 were $2.85. We do not expect your partnership to pay any
further distributions with respect to your partnership units. Anticipated
annualized distributions with respect to the Preferred OP Units are
$ and current annualized distributions with respect to the Common OP
Units are $2.25. This is equivalent to distributions of $ per year on
the number of tax-deferral % Preferred OP Units, or distributions of
$ per year on the number of tax deferral Common OP Units, that you
would receive in exchange for each of your partnership's units. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating
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Partnership and are not the result of arms-length negotiations. See
"Conflicts of Interest." The general partner of your partnership and the AIMCO
Operating Partnership believe that the valuation method described in "Valuation
of Units" provides a meaningful indication of value for residential apartment
properties although there are other ways to value real estate. A liquidation in
the future might generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
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apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $20.00 to $186.07
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
June 30, 1998 an aggregate of 10,938 units (representing less than 12.61% of the
total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to September 30, 1998, as reported by the
general partner and by The Partnership Spectrum, which is an independent,
third-party source. The gross sales prices reported by The Partnership Spectrum
do not necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices; thus the AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete. The transfer paperwork submitted
to the general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
ANGELES INCOME PROPERTIES, LTD. III
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $30.00 $ 60.00 (c) (c)
Second Quarter.................................. 30.00 186.07 52.00 52.00
First Quarter................................... 30.00 65.00 52.00 52.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 20.00 65.00 43.00 54.00
Third Quarter................................... 36.00 65.00 49.00 61.00
Second Quarter.................................. 20.00 52.00 48.00 65.00
First Quarter................................... 20.00 50.00 45.00 55.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 20.00 50.00 40.00 49.00
Third Quarter................................... 15.10 42.00 35.00 50.00
Second Quarter.................................. 19.00 45.00 -- --
First Quarter................................... 10.00 100.00 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the
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first day of each month. The prices in the table are based solely on
information provided to the general partner by sellers and buyers of units
transferred in sale transactions (i.e., excluding transactions believed to
result from the death of a limited partner, rollover to an IRA account,
establishment of a trust, trustee to trustee transfers, termination of a
benefit plan, distributions from a qualified or non-qualified plan, uniform
gifts, abandonment of units or similar non-sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Each of your partnership's wholly owned properties was
appraised in 1998, 1997 and 1996 by an independent, third party appraiser,
Koeppel Tener Real Estate Services, Inc. (the "Appraiser"), in connection with a
refinancing of the property. According to each appraisal report, the scope of
the appraisals included an inspection of each property and an analysis of the
surrounding market. The Appraiser relied principally on the income
capitalization approach to valuation and secondarily on the sales comparison
approach, and represented that its report was prepared in accordance with the
Code of Professional Ethics and Standards of Professional Appraisal Practice of
the Appraisal Institute and the Uniform Standards of Professional Appraisal
Practice, and in compliance with the Appraisal Standards set forth in the
Financial
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Institutions Reform, Recovery and Enforcement Act of 1989 (known as
"FIRREA"). The estimated market value of the fee simple estates of each property
specified in those appraisal reports is as listed in the chart below. Copies of
the summaries of the appraisals have been filed as exhibits to the AIMCO
Operating Partnership's Tender Offer Statement on Schedule 14D-1 filed with the
SEC.
<TABLE>
<CAPTION>
PROPERTY NAME 1998 1997 1996
------------- ---------- ---------- ----------
<S> <C> <C> <C>
Lake Forest Apartments................................... $5,300,000 $4,000,000 $3,550,000
Poplar Square Shopping Center............................ $5,250,000 $4,000,000 $7,500,000
---------- ---------- ----------
</TABLE>
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $124.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be
$109,000. This net asset value estimate was based on a hypothetical sale of all
of your partnership's properties and the distribution to the limited partners
and the general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders.
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We determined the offer consideration, and Stanger did not, and was not
requested to, make any recommendations as to the form or amount of consideration
to be paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also
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performed site inspections of your partnership's properties, reviewed local real
estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated
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to Stanger by your partnership, AIMCO, or the management of the partnership's
property. Stanger has not performed an independent appraisal, engineering study
or environmental study of the assets and liabilities of your partnership.
Stanger relied upon the representations of your partnership and AIMCO
concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
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COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2038. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests in conduct any business that may be lawfully conducted by
residential, commercial and industrial real properties a limited partnership organized pursuant to the
either directly or indirectly through partnership or Delaware Revised Uniform Limited Partnership Act (as
joint ventures with others. Subject to restrictions amended from time to time, or any successor to such
contained in your partnership's agreement of limited statute) (the "Delaware Limited Partnership Act"),
partnership, your partnership may perform all acts provided that such business is to be conducted in a
necessary, advisable or convenient to the business of manner that permits AIMCO to be qualified as a REIT,
your partnership including borrowing money and creating unless AIMCO ceases to qualify as a REIT. The AIMCO
liens. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner, in its sole discretion, may make contributions as may be established by the general
subsequent offerings of your partnership's securities, partner in its sole discretion. The net capital
including offerings of additional units and limited contribution need not be equal for all OP Unitholders.
partnership interests. The capital contribution need No action or consent by the OP Unitholders is required
not be equal for all limited partners and no action or in connection with the admission of any additional OP
consent is required in connection with the admission of Unitholder. See "Description of OP Units -- Management
any additional limited partners. The general partner by the AIMCO GP" in the accompanying Prospectus.
may not issue units in exchange for property. Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance of other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership by a majority vote of Partnership may transfer assets to joint ventures,
the limited partners to terminate such employment, with limited liability companies, partnerships,
or without cause, and without penalty to your corporations, business trusts or other business
partnership, upon no greater than sixty days notice to entities in which it is or thereby becomes a
the employed party. The general partner may not participant upon such terms and subject to such
purchase or lease any real property or acquire any loan conditions consistent with the AIMCO Operating Part-
or lease from your partnership or sell or lease any nership Agreement and applicable law as the general
real property, loan or lease to your partnership either partner, in its sole and absolute discretion, believes
directly or through an affiliate. However, the general to be advisable. Except as expressly permitted by the
partner or an affiliate may purchase property in its AIMCO Operating Partnership Agreement, neither the
own name and temporarily hold title thereto for the general partner nor any of its affiliates may sell,
purpose of facilitating its acquisition or financing by transfer or convey any property to the AIMCO Operating
your partnership if (1) the property is purchased by Partnership, directly or indirectly, except pursuant to
your partnership for a price no greater than the cost transactions that are determined by the general partner
of the property to the general partner or its in good faith to be fair and reasonable.
affiliates, (2) no difference exists in the interest
rates of the loans secured by the property at the time
acquired by the general partner or its affiliates and
at the time acquired by your partnership and (3)
neither the general partner nor its affiliates receive
any economic advantage by reason of holding or having
held title to the property. Your partnership may also
lease property to a partnership sponsored by the
general partner or its affiliates so long as the terms
of the lease are comparable to, or no less favorable to
your partnership than those offered to and accepted by
unrelated persons for comparable space and contained in
a written contract which precisely describes the
subject matter thereof and all compensation to be paid,
which contract, if not previously disclosed, must be
fully and property disclosed to all partners. Subject
to certain conditions contained in your partnership's
agreement of limited partnership, your partnership may
invest the assets of your partnership in entities
affiliated with the general partner of your
partnership. Your partnership may not make loans to the
general partner or its affiliates but the general
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partner and its affiliates may lend money to your
partnership provided that the interest and other
financing charges on loans to your partnership may not
be in excess of rates and charges which would be
charged by unrelated banks in a competitive position or
in any event in excess of the prime interest rate that
is charged from time to time by Bank of America
National Trust and Savings Association, Los Angeles,
California on 90-day unsecured loans to responsible and
substantial commercial borrowers. In addition, an
affiliate of your general partner may lend money to
your partnership to fund its acquisitions if your
partnership does not have sufficient cash proceed to
invest so long as: (1) such loan is made at interest
rates and charges not in excess of the rates and
charges then currently being paid by the lender for the
borrowed funds, but in no event may the interest rate
and charges exceed the interest rate and charges which
would be charged by unrelated banks in a competitive
position or in any event in excess of the prime
interest rate that is charged from time to time by Bank
of America National Trust and Savings Association, Los
Angeles, California on 90-day unsecured loans to
responsible and substantial commercial borrowers, (2)
your partnership agrees to repay promptly such loan
from the offering of units, but in no event later than
one year from the date of purchase of the property, (3)
such interim financing is not in an amount that exceeds
80% of the purchase price of the property and (4) the
affiliate of the general partner agrees to purchase the
property, as promptly as practical from your
partnership at a price equal to the cost of the
property to your partnership in the event that your
partnership is unable to make sufficient payments to
repay the loan for any reason. Unless certain
conditions are met, the general partner may not make a
permanent loan to your partnership nor may your
partnership finance the purchase of your partnership's
property by use of a "wraparound" or "all-inclusive"
note and mortgage or deed of trust under which the
general partner or any of its affiliates are the
obligee or secured party. Your partnership may not
grant to the general partner or its affiliates an
exclusive right or an exclusive employment to sell your
partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of Partnership has credit agreements that restrict, among
properties subject the properties acquired by your other things, its ability to incur indebtedness. See
partnership to one or mortgages, deeds of trust or "Risk Factors -- Risks of Significant Indebtedness" in
other security interest, provided, however, that your the accompanying Prospectus.
partnership will be permitted to acquire a property
subject to existing secured financing so long as the
outstanding balance of such mortgage indebtedness
assumed by your partnership does not exceed 40% of the
purchase price of the property and may borrow money
from third parties if it does not have sufficient funds
if certain conditions are met. The general partner may
not acquire any real property which, at the date of
acquisition, is subject to indebtedness secured by a
mortgage, deed of trust or other security interest on
real property having an unpaid principal balance
immediately after the acquisition equal to more than
40% of the purchase price of the real property, or
refinance any property be incurring indebtedness in
excess of 40% of the then appraised value of the
property for the first twelve months after purchase and
80% thereafter. The general partner may not acquire a
property subject to or subject a property to financing
which represents 10% of more of the purchase price
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
which contains a provision of a balloon payment due and
payable prior to the earlier of (1) ten years from the
date your partnership acquires the property or the
inception of the loan, whichever is later of (2) two
years beyond the estimated holding period for the
property, but in no event prior to seven years from the
date of acquisition of the property or the inception of
the loan, whichever is later. Your partnership may not
issue debt securities to the public. No creditor who
makes a non-recourse loan to your partnership will have
or acquire at any time, as a result of making such
loan, any direct or indirect interest in the profits,
capital or property of your partnership, other than as
a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership and California law, the general management power over the business and affairs of the
partner has the right, power and authority, on behalf AIMCO Operating Partnership. The OP Unitholders have
of your partnership, and in its name, to exercise all the right to vote on certain matters described under
of the rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without approval by the limited partners. Units -- Voting Rights" below. The general partner may
Limited partners have no right to participate in the not be removed by the OP Unitholders with or without
management or conduct of your partnership's business or cause.
affairs nor any power or authority to act for or on
behalf of your partnership in any respect whatsoever. In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. In the event that a claim for indemnification settlements and other amounts incurred in connection
against liabilities arising under the Securities Act of with any actions relating to the operations of the
1933, as amended (other than for the payment by your AIMCO Operating Partnership, as set forth in the AIMCO
partnership of expenses incurred or paid by the general Operating Partnership Agreement. The Delaware Limited
partner in the successful defense of any action, suit Partnership Act provides that subject to the standards
or proceeding) is asserted by the general partner in and restrictions, if any, set forth in its partnership
connection with the units, your partnership will, agreement, a limited partnership may, and shall have
unless in the opinion of its counsel the matter is the power to, indemnify and hold harmless any partner
settled by controlling precedent, submit to a court of or other person from and against any and all claims and
appropriate jurisdiction the question of whether such demands whatsoever. It is the position of the
indemnification by it is against public policy as Securities and Exchange Commission that indemnification
expressed in the Securities Act of 1933, as amended and of directors and officers for liabilities arising under
will inform the court of the position of the SEC with the Securities Act is against public policy and is
respect to such indemnification. Your partnership has unenforceable pursuant to Section 14 of the Securities
agreed to be governed by the court's final adjudication Act of 1933.
of such issue.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner, the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership and such other conditions as are controlling interest in the AIMCO Operating Partner-
set forth in your partnership's agreement of limited ship. Additionally, the AIMCO Operating Partnership
partnership are satisfied. The general partner may Agreement contains restrictions on the ability of OP
admit additional general partners without the consent Unitholders to transfer their OP Units. See
of the limited partners. No limited partner may "Description of OP Units -- Transfers and Withdrawals"
substitute a transferee of his units in such limited in the accompanying Prospectus.
partner's place without the consent of the general
partner which may be withheld at the sole discretion of
the general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership, (3) deletes or adds any provision required the OP Unitholders. The general partner will seek the
by any applicable law, (4) reflects any reduction of written consent of the OP Unitholders on the proposed
the partners' capital accounts, (5) reflects a change amendment or will call a meeting to vote thereon. See
in the name or the location of the principal place of "Description of OP Units -- Amendment of the AIMCO
business of your partnership, (6) reduces the required Operating Partnership Agreement" in the accompanying
minimum investment in your partnership to effect the Prospectus.
participation of your partnership in programs
designated to facilitate
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
secondary trading of the units. Your partnership's
agreement of limited partnership may not be amended to
change your partnership to a general partnership,
extend the term of your partnership, allow the
expulsion of the non-managing general partner without
the simultaneous expulsion of the managing general
partner or change the liability of the general partner
or the limited partners. All other amendments to your
partnership's agreement of limited partnership must be
approved by the limited partners owning more than 50%
of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership is entitled to The general partner does not receive compensation for
receive an annual management fee equal to 10% of the its services as general partner of the AIMCO Operating
Net Cash from Operations for each year for its services Partnership. However, the general partner is entitled
as general partner of your partnership and may also to payments, allocations and distributions in its
receive reimbursement for expenses incurred in such capacity as general partner of the AIMCO Operating
capacity. Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not for the debts, negligence, no OP Unitholder has personal liability for
liabilities, or obligations of your partnership in the AIMCO Operating Partnership's debts and
excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partner and its affiliates may acquire real properties believes are advisable. The AIMCO Operating Partnership
for their own account, or engage in the acquisition, Agreement expressly limits the liability of the general
development, operation or management of real estate on partner by providing that the general partner, and its
behalf of other entities, including business ventures officers and directors will not be liable or
similar to, related to or in direct or indirect accountable in damages to the AIMCO Operating
competition with any business of your partnership. Partnership, the limited partners or assignees for
However, the general partner and its affiliates will, errors in judgment or mistakes of fact or law or of any
if your partnership has funds available for investment, act or omission if the general partner or such director
grant a right of first refusal to your partnership for or officer acted in good faith. See "Description of OP
those real property investment opportunities which meet Units -- Fiduciary Responsibilities" in the
your partnership's investment objectives and policies accompanying Prospectus.
before they acquire these properties for their own
accounts. Neither your partnership nor any other
partner will have any right in or to such other
business ventures of the income or profits derived
therefrom.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
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COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner, approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner, ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership, and holders of at least 50% of the
terminate the employment of an outstanding Preferred OP Units will Under the AIMCO Operating Partner-
affiliate of your general partner. be necessary for effecting any ship Agreement, the general partner
amendment of any of the provisions has the power to effect the
A general partner may cause the of the Partnership Unit Desig- acquisition, sale, transfer,
dissolution of your partnership by nation of the Preferred OP Units exchange or other disposition of
retiring. In such event, your that materially and adversely any assets of the AIMCO Operating
partnership may be continued by the affects the rights or preferences Partnership (including, but not
remaining general partner if, in of the holders of the Preferred OP limited to, the exercise or grant
the opinion of counsel to your Units. The creation or issuance of of any conversion, option,
partnership, such election would any class or series of partnership privilege or subscription right or
not jeopardize your partnership's units, including, without any other right available in
status as a partnership for tax limitation, any partnership units connection with any assets at any
purposes. If no general partner that may have rights senior or time held by the AIMCO Operating
remains, your partnership may superior to the Preferred OP Units, Partnership) or the merger,
continue if, within ninety days of shall not be deemed to materially consolidation, reorganization or
the retirement, the limited adversely affect the rights or other combination of the AIMCO
partners holding more than 50% of preferences of the holders of Operating Partnership with or into
the units elect a substitute Preferred OP Units. With respect to another entity, all without the
general partner who is willing to the exercise of the above de- consent of the OP Unitholders.
continue your partnership scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
con-
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
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tinue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re-
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
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<S> <C> <C>
deemed, purchased or otherwise "Description of OP
acquired for consideration, nor Units -- Distributions" in the
shall any other cash or other accompanying Prospectus.
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fractional unit and on any securities exchange. The transferability of the OP Units.
if such assignment is less than all Preferred OP Units are subject to Until the expiration of one year
of the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least ten Partnership Agreement. subject to certain exceptions, such
units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignment taking place in the pre- Units, subject to certain expiration of one year, such OP
ceding 12 months, in the opinion of exceptions, such holder of Unitholder has the right to
counsel to your partnership, does Preferred OP Units may not transfer transfer all or any portion of its
not result in termination of your all or any portion of its Pre- OP Units to any person, subject to
partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor re- without the consent of the general conditions specified in the AIMCO
ceives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have compiled with discretion. After the expiration of right of first refusal. See
such other conditions as determined one year, such holders of Preferred "Description of OP Units --
by the general partner to comply OP Units has the right to transfer Transfers and Withdrawals" in the
with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to any person, subject to
transferee may be substituted as a the satisfaction of certain After the first anniversary of
limited partner if: (1) the general conditions specified in the AIMCO becoming a holder of Common OP
partner consents in writing, which Operating Partnership Agreement, Units, an OP Unitholder has the
consent may be granted or denied in including the general partner's right, subject to the terms and
the sole discretion of the general right of first refusal. conditions of the AIMCO Operating
partner, (2) the transferor elects Partnership Agreement, to require
to become a substitute limited After a one-year holding period, a the AIMCO Operating Partnership to
partner by delivering to the holder may redeem Preferred OP redeem all or a portion of the
general partner a written notice, Units and receive in exchange Common OP Units held by such party
executed and acknowledged by the therefor, at the AIMCO Operating in exchange for a cash amount based
assignor and assignee of such Partnership's option, (i) subject on the value of shares of Class A
election, (3) the assignee executes to the terms of any Senior Units, Common Stock. See "Description of
and acknowledges such other cash in an amount equal to the OP Units -- Redemption Rights" in
instruments that the general Liquidation Preference of the the accompanying Prospectus. Upon
partner may require including an Preferred OP Units tendered for receipt of a notice of redemption,
adoption of your partnership's redemption, (ii) a number of shares the AIMCO Operating Partnership
agreement of limited partnership, of Class I Cumulative Preferred may, in its sole and absolute
and (4) the assignee pays the Stock of AIMCO that pay an discretion but subject to the
partnership for its expenses aggregate amount of dividends yield restrictions on the ownership of
incurred in the transaction. equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
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<PAGE> 343
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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<PAGE> 348
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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<PAGE> 349
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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<PAGE> 350
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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<PAGE> 351
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to 10%
of the Net Cash from Operations for each year for its services as general
partner of your partnership and may also receive reimbursement for expenses
incurred in such capacity. The general partner of your partnership received fees
and reimbursements totaling $225,000 in 1996, $197,000 in 1997 and $48,000 for
the first six months of 1998. The property manager received management fees of
$64,000 in 1996, $70,000 in 1997 and $35,000 for the first six months of 1998.
The AIMCO Operating Partnership has no current intention of changing the fee
structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-77
<PAGE> 352
YOUR PARTNERSHIP
GENERAL
Angeles Income Properties, Ltd. III was organized on May 26, 1983, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently includes the following two
properties: Lake Forest Apartments, a 136-unit complex in Brandon, Mississippi;
and Poplar Square Shopping Center, a 118,474 square-foot commercial complex in
Medford, Oregon. The general partner of your partnership is Angeles Realty
Corporation II, which is a majority-owned subsidiary of AIMCO. Insignia
Residential Group, L.P., which is a majority-owned subsidiary of AIMCO, serves
as manager of the properties owned by your partnership. As of September 15,
1998, there were 86,778 units of limited partnership interest issued and
outstanding, which were held of record by 3,412 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated March 7, 1984, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner had, on average,
begun selling their properties during the fifth or sixth year after the
investments were made and had sold all of their properties after eight years of
ownership. The prospectus further stated, however, that the general partner was
unable to predict how long the partnership would remain invested in the
properties and that the partnership acquired such properties for investment
rather than resale. In any event, according to the prospectus, the general
partner anticipated that a disposition of the properties would depend on, among
other things, the current real estate and money markets, economic climate and
income tax consequences to the limited partners. Under your partnership's
agreement of limited partnership, the term of the partnership will continue
until December 31, 2038, unless sooner terminated as provided in the agreement
or by law. Limited partners could, as an alternative to tendering their units,
take a variety of possible actions, including voting to liquidate the
partnership or amending the agreement of limited partnership to authorize
limited partners to cause the partnership to merge with another entity or engage
in a "roll-up" or similar transaction.
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<PAGE> 353
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is now a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest."
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In the event that a claim for indemnification against liabilities
arising under the Securities Act of 1933, as amended (other than for the payment
by your partnership of expenses incurred or paid by the general partner in the
successful defense of any action, suit or proceeding) is asserted by the general
partner in connection with the units, your partnership will, unless in the
opinion of its counsel the matter is settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act of 1933, as
amended and will inform the court of the position of the SEC with respect to
such indemnification. Your partnership has agreed to be governed by the court's
final adjudication of such issue.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
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<PAGE> 354
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $500.00.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 0.00
January 1, 1996 - December 31, 1996......................... 0.00
January 1, 1997 - December 31, 1997......................... 15.43
January 1, 1998 - June 30, 1998............................. 2.85
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 0.51% interest in your partnership, including 5 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received reimbursement for expenses
in respect of its capacity as general partner of your partnership as described
in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $333,022
1995........................................................ 234,670
1996........................................................ 225,000
1997........................................................ 197,000
1998 (through June 30)...................................... 48,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $67,520
1995........................................................ 70,973
1996........................................................ 64,000
1997........................................................ 70,000
1998 (through June 30)...................................... 35,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
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SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of
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<PAGE> 356
AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has previously
performed certain legal services on behalf of AIMCO and the AIMCO Operating
Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Income Properties, Ltd.
III appearing in Angeles Income Properties, Ltd. III Annual Report (Form 10-KSB)
for the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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<PAGE> 357
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1995, 1996 and 1997, and quarterly report on Form 10-QSB for the period
ending June 30, 1998, which the Partnership's management has indicated to
be the most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
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4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
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the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
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<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
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<PAGE> 362
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
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<PAGE> 363
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
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<PAGE> 364
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
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<PAGE> 365
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 366
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES INCOME PROPERTIES, LTD. IV
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $131.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $128.52 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 367
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-19
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Income Properties, Ltd. IV................. S-25
Angeles Income Properties, Ltd. IV........... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-66
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
</TABLE>
i
<PAGE> 368
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-78
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-79
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-80
LEGAL MATTERS.................................. S-81
EXPERTS........................................ S-81
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 369
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Income Properties, Ltd. IV. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 370
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 371
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership has not paid any distributions on your units since 1991.
We will pay fixed quarterly distributions of $ per unit on
the Tax-Deferral % Preferred OP Units before any distributions are paid
to holders of Tax-Deferral Common OP Units. We pay quarterly distributions
on the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in two properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 372
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $5.00 per unit to $225.00 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, your
general partner estimated the net asset value of your units to be $131.00
per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $128.52 per unit. However, we do not
believe that these valuations represent the current fair market value of
your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 373
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, if you tender less than
all of your units, you must continue to hold at least ten units following
our acceptance of tendered units. You may tender fractional units only if
you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 374
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 375
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's [properties] may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$131.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $128.52 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $5.00 per unit to $225.00 per
unit over the period from January 1, 1997 through September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
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deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages two
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
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DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
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COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately an
8.2% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in significant amounts of
taxable income to you and your partners. Another option for liquidation of
your
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investment would be to sell your units in a private transaction. Any such
sale could be at a very substantial discount from your pro rata share of
the fair market value of your partnership's property and might involve
significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
S-15
<PAGE> 384
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 385
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $5.00 to $225.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 386
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership is entitled to
receive an annual management fee equal to 10% of the Net Cash from Operations
(as defined in your partnership's agreement of limited partnership) for each
year for its services as general partner of your partnership so long as the
limited partners receive 7.25% per annum on their capital investment and may
also receive reimbursement for expenses incurred in such capacity. The general
partner of your partnership received fees and reimbursements totaling $109,000
for the six months ended June 30, 1998. The property manager received management
fees of $68,000 for the first six months of 1998. We have no current intention
of changing the fee structure for your property manager.
Competition Among Properties. Your partnership's [properties] and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
S-18
<PAGE> 387
YOUR PARTNERSHIP
Angeles Income Properties, Ltd. IV was organized on June 29, 1984, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following two
commercial properties: Eastgate Marketplace, a 147,000 square-foot complex in
Walla Walla, Washington; and Factory Merchants Mall, a 200,000 square-foot
complex in Pigeon Forge, Tennessee. The general partner of your partnership is
Angeles Realty Corporation, L.P., which is a majority-owned subsidiary of AIMCO.
Insignia Commercial Group, L.P., which is a majority-owned subsidiary of AIMCO,
serves as manager of the properties owned by your partnership. As of August 1,
1998, there were 131,585 units of limited partnership interest issued and
outstanding, which were held of record by 5,386 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 388
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 389
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 390
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 391
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 392
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 393
SUMMARY FINANCIAL INFORMATION OF ANGELES INCOME PROPERTIES, LTD. IV
The summary financial information of Angeles Income Properties, Ltd. IV for
the six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Angeles Income Properties, Ltd. IV for the years ended December
31, 1997, 1996, and 1995 is based on audited financial statements. This
information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
ANGELES INCOME PROPERTIES, LTD. IV
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
----------------- -----------------------------
1998 1997 1997 1996 1995
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $ 2,225 $ 2,159 $ 4,557 $ 4,349 $ 6,411
Net Income (Loss)........................................... (196) 13,881 13,782 (2,285) 1,447
Net Income per limited partnership unit..................... (1.46) 103.38 102.64 (16.99) 10.76
Distributions per limited partnership unit.................. -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- -----------------------------
1998 1997 1997 1996 1995
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $10,447 $11,011 $10,799 $ 11,357 $ 12,281
Total Assets................................................ 15,705 16,156 16,128 16,128 16,623
Notes Payable............................................... 15,138 15,300 15,221 15,376 14,469
Partners' Capital(Deficit).................................. 291 586 487 (13,295) (11,010)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING ANGELES INCOME
PARTNERSHIP PROPERTIES, LTD. IV
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $0.00
</TABLE>
S-25
<PAGE> 394
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $5.00 per unit to
$225.00 per unit from January 1, 1997 through September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$131.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $128.52 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 395
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 396
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages two properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Your
partnership has not paid distributions with respect to your units since 1991.
Therefore, distributions with respect to the Preferred OP Units and Common OP
Units that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison of
Ownership of Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
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<PAGE> 397
deemed cash distribution. Although your general partner has no current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
properties owned by your partnership. Through subsidiaries, AIMCO currently
owns, in the aggregate, approximately an 8.2% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its
S-29
<PAGE> 398
ownership interest in certain Insignia Partnerships which would provide a
larger asset and capital base and increased diversification. As of October ,
1998, the AIMCO Operating Partnership has made offers to of the
Insignia Partnerships, including your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In August 1998, Cooper River, L.L.C., then an
affiliate of Insignia and now our affiliate, commenced a tender offer pursuant
to which it acquired units (representing approximately % of the
number outstanding) at a cash purchase price of $75.00 per unit on ,
1998.
Prior to such tender offer, Madison Partnership Liquidity Investors 64,
LLC, which was unaffiliated with Insignia and is not affiliated with AIMCO,
commenced a tender offer for $35.00 per unit and purchased units in
, 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your
S-30
<PAGE> 399
partnership. Given improving rental market conditions, the level of
distributions might increase over time. It is possible that the private resale
market for properties could improve over time, making a sale of the
partnership's property in a private transaction at some point in the future a
more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
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- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, if you tender less than all of your units, you must continue to hold at
least ten units following our acceptance of tendered units. You may tender
fractional units only if you are tendering all of your units. No alternative,
conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal tax purposes. This provision may limit sales of units in the
secondary market and in private transactions for the twelve-month period
following completion of this offer. The general partner of your partnership has
advised the AIMCO Operating Partnership that it will not process any requests
for recognition of substitution of limited partners upon a transfer of units
during such twelve-month period which the general partner believes may cause a
tax termination in contravention of the agreement of limited partnership. The
AIMCO Operating Partnership took this restriction into account in determining
the maximum number of units for which this offer is made. Based on the general
partner's records, approximately 6,781 units in your partnership have been
transferred during the twelve months ended December 31, 1997 (representing
approximately 5.15% of the outstanding units). As a result, the AIMCO Operating
Partnership does not believe that this restriction will preclude it from
acquiring the maximum number of units for which this offer is made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by of the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Eastgate Marketplace..................... $ % $
Factory Merchants Mall...................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Your partnership has not paid any distributions with respect to your
units since 1991. Anticipated annualized distributions with respect to the
Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to
distributions of $ per year on the number of tax-deferral %
Preferred OP Units, or distributions of $ per year on the number of
tax deferral Common OP Units, that you would receive in exchange for each
of your partnership's units. Therefore, distributions with respect to the
Preferred OP Units and Common OP Units that we are offering are expected to
be , immediately following our offer, than the distributions with
respect to your units. See "Comparison of Ownership of Your Units and AIMCO
OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
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apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $5.00 to $225.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from July 1, 1996 to June
30, 1998 an aggregate of 15,285 units (representing less than 11.7% of the total
outstanding units) was transferred (excluding units transferred by Insignia to
IPLP in February 1998 and in tender offers) in sale transactions. Set forth in
the table below are the high and low sales prices of units for the quarterly
periods from January 1, 1995 to September 30, 1998, as reported by the general
partner and by The Partnership Spectrum, which is an independent, third-party
source. The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported prices; thus the AIMCO Operating
Partnership does not know whether the information compiled by The Partnership
Spectrum is accurate or complete. The transfer paperwork submitted to the
general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
ANGELES INCOME PROPERTIES, LTD. IV
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter.................................... $30.00 $ 77.05 (c) (c)
Second Quarter................................... 30.00 150.00 $55.00 $67.00
First Quarter.................................... 5.00 83.50 63.00 72.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter................................... 25.00 90.00 50.00 64.00
Third Quarter.................................... 25.00 89.00 57.00 75.00
Second Quarter................................... 20.75 225.00 63.00 92.00
First Quarter.................................... 25.00 90.00 65.00 91.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter................................... 25.00 90.00 75.00 90.00
Third Quarter.................................... 17.50 89.00 43.00 79.00
Second Quarter................................... 30.00 84.77 -- --
First Quarter.................................... 35.00 50.00 -- --
</TABLE>
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<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL
PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1995:
Fourth Quarter................................... 28.00 50.00 -- --
Third Quarter.................................... 20.00 45.00 -- --
Second Quarter................................... 1.25 43.50 -- --
First Quarter.................................... 5.00 31.50 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The
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liquidation analysis assumes that the assets would be disposed of in an
orderly manner and not sold in forced or distressed sales where sellers might be
expected to dispose of their interests at substantial discounts to their actual
fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Each of your partnership's properties was appraised in 1998 by
an independent, third party appraiser, Koeppel Tener Real Estate Services, Inc.
(the "Appraiser"). In addition, Eastgate Marketplace Shopping Center was
appraised in each of the two prior years. According to each appraisal report,
the scope of the appraisal included an inspection of the property and an
analysis of the surrounding market. The Appraiser relied principally on the
income capitalization approach to valuation and secondarily on the sales
comparison approach, and represented that its report was prepared in accordance
with the Code of Professional Ethics and Standards of Professional Appraisal
Practice of the Appraisal Institute and the Uniform Standards of Professional
Appraisal Practice, and in compliance with the Appraisal Standards set forth in
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (known
as "FIRREA"). The estimated market value of the fee simple estates of each
property specified in those appraisal reports is as listed in the chart below. A
copy of the summary of the appraisal has been filed as an exhibit to the AIMCO
Operating Partnership's Tender Offer Statement on Schedule 14D-1 filed with the
SEC.
<TABLE>
<CAPTION>
PROPERTY NAME 1998 1997 1996
------------- ----------- ---------- ----------
<S> <C> <C> <C>
Eastgate Marketplace............................... $ 4,800,000 $4,100,000 $3,000,000
Factory Merchants Mall............................. $24,500,000 n/a n/a
</TABLE>
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $131.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $93.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
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<PAGE> 423
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location,
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number of units and unit mix or square footage, age, and amenities; (iv)
reviewed summary historical operating statements for your partnership's
properties for 1996 and 1997 and through June 30, 1998; (v) reviewed operating
budgets for your partnership's properties for 1998, as prepared by your
partnership; (vi) reviewed information prepared by management relating to any
debt encumbering your partnership's properties; (vii) reviewed information
regarding market rental rates and conditions for similar properties in the
general market area of your partnership's properties and other information
relating to acquisition criteria for similar properties; (viii) reviewed
internal financial analyses and forecasts prepared by your partnership of the
estimated current net liquidation value of your partnership; (ix) reviewed
information provided by AIMCO concerning the AIMCO Operating Partnership, the
Common OP Units and the Preferred OP Units; (x) reviewed available trading
information for the units; and (xi) conducted other studies, analysis and
inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your
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partnership of expenses associated with such a liquidation. The liquidation
analysis assumed that your partnership's properties were sold to an independent
third-party buyer at the current property value estimated by the management of
your partnership and that normal and customary costs of property sale were
incurred, that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated between the general and limited partners in
accordance with your partnership agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
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Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash From Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests, conduct any business that may be lawfully conducted by
including debt interest, in residential, commercial and a limited partnership organized pursuant to the
industrial real properties either directly or Delaware Revised Uniform Limited Partnership Act (as
indirectly through partnership or joint ventures with amended from time to time, or any successor to such
others. Subject to restrictions contained in your statute) (the "Delaware Limited Partnership Act"),
partnership's agreement of limited partnership, your provided that such business is to be conducted in a
partnership may perform all acts necessary, advisable manner that permits AIMCO to be qualified as a REIT,
or convenient to the business of your partnership unless AIMCO ceases to qualify as a REIT. The AIMCO
including borrowing money and creating liens. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner, in its sole discretion, may make contributions as may be established by the general
subsequent offerings of your partnership's securities, partner in its sole discretion. The net capital
including offerings of additional units and limited contribution need not be equal for all OP Unitholders.
partnership interests. The capital contribution need No action or consent by the OP Unitholders is required
not be equal for all limited partners and no action or in connection with the admission of any additional OP
consent is required in connection with the admission of Unitholder. See "Description of OP Units -- Management
any additional limited partners. The general partner by the AIMCO GP" in the accompanying Prospectus.
may not issue units in exchange for property. Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership by a majority vote of Partnership may transfer assets to joint ventures,
the limited partners to terminate such employment, with limited liability companies, partnerships,
or without cause, and without penalty to your corporations, business trusts or other business
partnership, upon no greater than sixty days notice to entities in which it is or thereby becomes a
the employed party. The general partner may not participant upon such terms and subject to such
purchase or lease any real property or acquire any loan conditions consistent with the AIMCO Operating Part-
or lease from your partnership or sell or lease any nership Agreement and applicable law as the general
real property, loan or lease to your partnership either partner, in its sole and absolute discretion, believes
directly or through an affiliate. However, the general to be advisable. Except as expressly permitted by the
partner or an affiliate may purchase property in its AIMCO Operating Partnership Agreement, neither the
own name and temporarily hold title thereto for the general partner nor any of its affiliates may sell,
purpose of facilitating its acquisition or financing by transfer or convey any property to the AIMCO Operating
your partnership if (1) the property is purchased by Partnership, directly or indirectly, except pursuant to
your partnership for a price no greater than the cost transactions that are determined by the general partner
of the property to the general partner or its in good faith to be fair and reasonable.
affiliate, (2) no difference exists in the interest
rates of the loans secured by the property at the time
acquired by the general partner or its affiliates and
at the time acquired by your partnership and (3)
neither the general partner nor its affiliates receive
any economic advantage by reason of holding or having
held title to the property. Your partnership may also
lease property to a partnership sponsored by the
general partner or its affiliates so long as the terms
of the lease are comparable to, or no less favorable to
your partnership than those offered to and accepted by
unrelated persons for comparable space and contained in
a written contract which precisely describes the
subject matter thereof and all compensation to be paid,
which contract, if not previously disclosed, must be
fully and properly disclosed to all partners. If the
general partner or its affiliates sublease such space,
all rent received in excess of the rent paid to your
partnership will be paid to your partnership. Subject
to certain conditions contained in your partnership's
agreement of limited partnership, your partnership may
invest the assets of your partnership in entities
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
affiliated with the general partner of your
partnership. Your partnership may not make loans to the
general partner or its affiliates but the general
partner and its affiliates may lend money to your
partnership provided that the interest and other
financing charges on loans to your partnership are not
in excess of amounts paid by the general partner for
borrowed funds (provided, however, that such interest
rates and charges are not in excess of rates and
charges which would be charged by unrelated lending
institutions on comparable loans for the same purpose,
in the same locality of the property (if such loan is
made in connection with a particular property). Such
loans may not require a prepayment charge or penalty if
such loan is secured by a mortgage or encumbrance of
your partnership's property. In addition, an affili-
ate of your general partner may lend money to your
partnership to fund its acquisitions if your
partnership does not have sufficient cash proceeds to
invest so long as: (1) such loan is made at interest
rates and charges not in excess of the rates and
charges then currently being paid by the lender for the
borrowed funds, but in no event may the interest rate
and charges exceed the interest rate and charges which
would be charged by unrelated lending institutions on
comparable loans for the same purpose, in the same
locality of the property (if such loan is made in
connection with a particular property), (2) your
partnership agrees to repay promptly such loan from the
offering of units, but in no event later than one year
from the date of purchase of the property, (3) such
interim financing is not in an amount that exceeds 80%
of the purchase price of the property and (4) the
affiliate of the general partner agrees to purchase the
property, as promptly as practical from your
partnership at a price equal to the cost of the
property to your partnership in the event that your
partnership is unable to make sufficient payments to
repay the loan for any reason. Unless certain
conditions are met, the general partner may not make a
permanent loan to your partnership nor may your
partnership finance the purchase of your partnership's
property by use of a "wraparound" or "all-inclusive"
note and mortgage or deed of trust under which the
general partner or any of its affiliates are the
obligee or secured party. Your partnership may not
grant to the general partner or its affiliates an
exclusive right or an exclusive employment to sell your
partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of all Partnership has credit agreements that restrict, among
properties, subject all such properties acquired by other things, its ability to incur indebtedness. See
your partnership to one or more mortgages, deeds of "Risk Factors -- Risks of Significant Indebtedness" in
trust or other security interest which would exceed an the accompanying Prospectus.
aggregate amount equal to 40% of the purchase price of
all properties, provided; however, that your
partnership is permitted to acquire a particular
property subject to existing secured financing and
incur new financing in connection with such acquisition
so long as the outstanding balance of such mortgage
indebtedness assumed and incurred by your partnership
does not exceed 50% of the purchase price of such
property. The general partner may not acquire a
property subject to or subject a property to financing
which represents 25% or more of the purchase price or
secondary financing which represents 10% or more of the
purchase price which contains a provision of a balloon
payment due and payable prior to the earlier of (1) ten
years from
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
the date your partnership acquired the property or (2)
two years beyond the estimated holding period for the
property, but in no event prior to seven years from the
date of acquisition of the property. All financing
incurred by your partnership will generally provide for
periodic payments in an amount which would be
sufficient to self-liquidate the loans over periods of
not more than thirty years. Your partnership may not
issue debt securities to the public. No creditor who
makes a non-recourse loan to your partnership will have
or acquire at any time, as a result of making such
loan, any direct or indirect interest in the profits,
capital or property of your partnership, other than as
a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and will be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership and California law, the general management power over the business and affairs of the
partner has the right, power and authority, on behalf AIMCO Operating Partnership. The OP Unitholders have
of your partnership, and in its name, to exercise all the right to vote on certain matters described under
of the rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without approval by the limited partners. Units -- Voting Rights" below. The general partner may
Limited partners have no right to participate in the not be removed by the OP Unitholders with or without
management or conduct of your partnership's business or cause.
affairs nor any power or authority to act for or on
behalf of your partnership in any respect whatsoever. In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. In no event, however, will such indemnification settlements and other amounts incurred in connection
cover liabilities arising under state securities laws with any actions relating to the operations of the
and the Securities Act of 1933, as amended. AIMCO Operating Partnership, as set forth in the AIMCO
Operating Partnership Agreement. The Delaware Limited
Partnership Act provides that subject to the standards
and restrictions, if any, set forth in its partnership
agreement, a limited partnership may, and shall have
the power to, indemnify and hold harmless any partner
or other person from and against any and all claims and
demands whatsoever. It is the position of the
Securities and Exchange Commission that indemnification
of directors and officers for liabilities arising under
the Securities Act is against public policy and is
unenforceable pursuant to Section 14 of the Securities
Act of 1933.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner, the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership and such other conditions as are controlling interest in the AIMCO Operating Partner-
set forth in your partnership's agreement of limited ship. Additionally, the AIMCO Operating Partnership
partnership are satisfied. The general partner may Agreement contains restrictions on the ability of OP
admit additional general partners without the consent Unitholders to transfer their OP Units. See
of the limited partners. No limited partner may "Description of OP Units -- Transfers and Withdrawals"
substitute a transferee of his units in such limited in the accompanying Prospectus.
partner's place without the consent of the general
partner which may be withheld at the sole discretion of
the general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership, (3) deletes or adds any provision required the OP Unitholders. The general partner will seek the
by any applicable law, (4) reflects any reduction of written consent of the OP Unitholders on the proposed
the partners' capital accounts, (5) reflects a change amendment or will call a meeting to vote thereon. See
in the name or the location of the principal place of "Description of OP Units -- Amendment of the AIMCO
business of your partnership or (6) reduces the Operating Partnership Agreement" in the accompanying
required minimum investment in your partnership to Prospectus.
effect the participation of your partnership in
programs designed to facilitate secon-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
dary trading of the units. Your partnership's agreement
of limited partnership may not be amended to change
your partnership to a general partnership, extend the
term of your partnership, allow the expulsion of the
non-managing general partner without the simultaneous
expulsion of the managing general partner or change the
liability of the general partner or the limited
partners. Any amendment which diminishes the rights of
the general partner may not be made without the consent
of the general partner or the limited partners owning
more than 50% of the units. All other amendments to
your partnership's agreement of limited partnership
must be approved by the limited partners owning more
than 50% of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership is entitled to The general partner does not receive compensation for
receive 10% of the Net Cash from Operations (as defined its services as general partner of the AIMCO Operating
in your partnership's agreement of limited partnership) Partnership. However, the general partner is entitled
for each year for its services as general partner of to payments, allocations and distributions in its
your partnership so long as the limited partners capacity as general partner of the AIMCO Operating
receive 7.25% per annum on their capital investment and Partnership. In addition, the AIMCO Operating Part-
may also receive reimbursement for expenses incurred in nership is responsible for all expenses incurred
such capacity. relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for the negligence, no OP Unitholder has personal liability for
debts, liabilities, or obligations of your partnership the AIMCO Operating Partnership's debts and
in excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
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Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other
general partner may not
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
employ or permit others to employ such funds or assets conflict avoidance agreements with various affiliates
in any manner except for the benefit of your of the AIMCO Operating Partnership and the general
partnership nor commingle funds of your partnership partner, on such terms as the general partner, in its
with any other person. The general partner and its sole and absolute discretion, believes are advisable.
affiliates may acquire real properties for their own The AIMCO Operating Partnership Agreement expressly
account, or engage in the acquisition, development, limits the liability of the general partner by
operation or management of real estate on behalf of providing that the general partner, and its officers
other entities, including business ventures similar to, and directors will not be liable or accountable in
related to or in direct or indirect competition with damages to the AIMCO Operating Partnership, the limited
any business of your partnership. However, the general partners or assignees for errors in judgment or
partner and its affiliates will, if your partnership mistakes of fact or law or of any act or omission if
has funds available for investment, grant a right of the general partner or such director or officer acted
first refusal to your partnership for those real in good faith. See "Description of OP
property investment opportunities which meet your Units -- Fiduciary Responsibilities" in the
partnership's investment objectives and policies before accompanying Prospectus.
they acquire these properties for their own account.
Neither your partnership nor any other partner will
have any right in or to such other business ventures of
the income or profits derived therefrom.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
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COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions, terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner; ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership; and holders of at least 50% of the
terminate the employment of an outstanding Preferred OP Units will Under the AIMCO Operating Partner-
affiliate of your general partner. be necessary for effecting any ship Agreement, the general partner
amendment of any of the provisions has the power to effect the
A general partner may cause the of the Partnership Unit Desig- acquisition, sale, transfer,
dissolution of your partnership by nation of the Preferred OP Units exchange or other disposition of
retiring. In such event, your that materially and adversely any assets of the AIMCO Operating
partnership may be continued by the affects the rights or preferences Partnership (including, but not
remaining general partner if, in of the holders of the Preferred OP limited to, the exercise or grant
the opinion of counsel to your Units. The creation or issuance of of any conversion, option,
partnership, such election would any class or series of partnership privilege or subscription right or
not jeopardize your partnership's units, including, without any other right available in
status as a partnership for tax limitation, any partnership units connection with any assets at any
purposes. If no general partner that may have rights senior or time held by the AIMCO Operating
remains, your partnership may superior to the Preferred OP Units, Partnership) or the merger,
continue if, within ninety days of shall not be deemed to materially consolidation, reorganization or
the retirement, the limited adversely affect the rights or other combination of the AIMCO
partners holding more than 50% of preferences of the holders of Operating Partnership with or into
the units elect a substitute Preferred OP Units. With respect to another entity, all without the
general partner who is willing to the exercise of the above de- consent of the OP Unitholders.
continue your partnership. scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
their sole and absolute discretion,
to continue the business of the
AIMCO Operating Partnership and to
the appointment of a successor
general partner. The general
partner may elect to dissolve the
AIMCO Operating Partnership in its
sole and absolute discretion, with
or without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
or other property be paid or
distributed to or for the benefit
of holders of Junior Units. See
"Description of Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fraction unit and if on any securities exchange. The transferability of the OP Units.
such assignment is less than all of Preferred OP Units are subject to Until the expiration of one year
the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least ten Partnership Agreement. subject to certain exceptions, such
units, except in certain circum- OP Unitholder may not transfer all
stances, (2) the assignee and the Pursuant to the AIMCO Operating or any portion of its OP Units to
assignor execute, acknowledge and Partnership Agreement, until the any transferee without the consent
deliver to the general partner a expiration of one year from the of the general partner, which
written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignment taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any person, subject to
your partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor without the consent of the general conditions specified in the AIMCO
receives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have complied with discretion. After the expiration of right of first refusal. See
such other conditions as deter- one year, such holders of Preferred "Description of OP Units --
mined by the general partner to OP Units has the right to transfer Transfers and Withdrawals" in the
comply with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to any person, subject to
transferee may be substituted as a the satisfaction of certain After the first anniversary of
limited partner if: (1) the general conditions specified in the AIMCO becoming a holder of Common OP
partner consents in writing, which Operating Partnership Agreement, Units, an OP Unitholder has the
consent may be granted or denied in including the general partner's right, subject to the terms and
the sole discretion of the general right of first refusal. conditions of the AIMCO Operating
partner, (2) the transferor elects Partnership Agreement, to require
to become a substitute limited After a one-year holding period, a the AIMCO Operating Partnership to
partner by delivering to the holder may redeem Preferred OP redeem all or a portion of the
general partner a written notice, Units and receive in exchange Common OP Units held by such party
executed and acknowledged by the therefor, at the AIMCO Operating in exchange for a cash amount based
assignor and assignee of such Partnership's option, (i) subject on the value of shares of Class A
election, (3) the assignee executes to the terms of any Senior Units, Common Stock. See "Description of
and acknowledges such other cash in an amount equal to the OP Units -- Redemption Rights" in
instruments that the general Liquidation Preference of the the accompanying Prospectus. Upon
partner may require including an Preferred OP Units tendered for receipt of a notice of redemption,
adoption of your partnership's redemption, (ii) a number of shares the AIMCO Operating Partnership
agreement of limited partnership, of Class I Cumulative Preferred may, in its sole and absolute
and (4) the assignee pays the Stock of AIMCO that pay an discretion but subject to the
partnership for its expenses aggregate amount of dividends yield restrictions on the ownership of
incurred in the transaction. equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 437
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
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Voting Rights
<TABLE>
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Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
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Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
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ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to 10%
of the Net Cash from Operations (as defined in your partnership's agreement of
limited partnership) for each year for its services as general partner of your
partnership so long as the limited partners receive 7.25% per annum on their
capital investment and may also receive reimbursement for expenses incurred in
such capacity. The general partner of your partnership received fees and
reimbursements totaling $242,000 in 1996, $372,000 in 1997 and $109,000 for the
first six months of 1998. The property manager received management fees of
$131,000 in 1996, $129,000 in 1997 and $68,000 for the first six months of 1998.
The AIMCO Operating Partnership has no current intention of changing the fee
structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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YOUR PARTNERSHIP
GENERAL
Angeles Income Properties, Ltd. IV was organized on June 29, 1984, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following two
commercial properties: Eastgate Marketplace, a 147,000 square-foot complex in
Walla Walla, Washington; and Factory Merchants Mall, a 200,000 square-foot
complex in Pigeon Forge, Tennessee. The general partner of your partnership is
Angeles Realty Corporation, L.P., which is a majority-owned subsidiary of AIMCO.
A majority-owned subsidiary of AIMCO, serves as manager of the properties owned
by your partnership. As of August 1, 1998, there were 131,585 units of limited
partnership interest issued and outstanding, which were held of record by 5,386
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated April 25, 1985, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that opportunities
for refinancing, sale or other disposition will not be available within four
years of acquisition. Under your partnership's agreement of limited partnership,
the term of the partnership will continue until December 31, 2035, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In
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addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision by the general partner to
sell, refinance, upgrade with capital improvements or hold a particular
partnership property. Based on the above considerations, the general partner has
determined that it is not in the best interests of limited partners to sell or
refinance any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts of failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In no event, however, will such indemnification cover liabilities
arising under state securities laws and the Securities Act of 1933, as amended.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
DISTRIBUTIONS
Your partnership has paid no distributions since 1991. The original cost
per unit was $500.00.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
an 8.2% interest in your partnership, including 8,374 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
S-79
<PAGE> 448
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $497,966
1995........................................................ 334,171
1996........................................................ 242,000
1997........................................................ 372,000
1998 (through June 30)...................................... 109,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $123,405
1995........................................................ 171,218
1996........................................................ 131,000
1997........................................................ 129,000
1998 (through June 30)...................................... 68,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility
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<PAGE> 449
provides for the conversion of the revolving facility into a three year
term loan. The availability of funds to the AIMCO Operating Partnership under
the credit facility is subject to certain borrowing base restrictions and other
customary restrictions, including compliance with financial and other covenants
thereunder. The financial covenants require the AIMCO Operating Partnership to
maintain a ratio of debt to gross asset value of no more than 0.55 to 1.0, an
interest coverage ratio of 2.25 to 1.0 and a fixed charge coverage ratio of at
least 1.6 to 1.0 through December 31, 1998, 1.7 to 1.0 from January 1, 1999
through June 30, 1999, and 1.8 to 1.0 thereafter. In addition, the credit
facility limits the AIMCO Operating Partnership from distributing more than 80%
of its Funds From Operations (as defined) to holders of OP Units, imposes
minimum net worth requirements and provides other financial covenants related to
certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Income Properties, Ltd. IV
appearing in Angeles Income Properties, Ltd. IV Annual Report (Form 10-KSB) for
the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
S-81
<PAGE> 450
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1995, 1996 and 1997, and quarterly report on Form 10-QSB for the period
ending June 30, 1998, which the Partnership's management has indicated to
be the most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 451
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 452
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 453
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership, are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
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<PAGE> 454
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
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<PAGE> 455
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
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<PAGE> 456
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
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<PAGE> 457
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexington Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 458
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 459
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES INCOME PROPERTIES, LTD. 6
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF THE
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF
OFFER AND TO RENDER AN OPINION AS TO THE YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND THE
PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $394.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $381.31 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few properties to holding an interest in
our large portfolio of properties. In the future, the properties owned by
your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 460
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-15
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-17
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Income Properties, Ltd. 6.................. S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-66
DESCRIPTION OF PREFERRED OP UNITS.............. S-70
General...................................... S-70
Ranking...................................... S-70
Distributions................................ S-70
Allocation................................... S-71
Liquidation Preference....................... S-71
Redemption................................... S-72
Voting Rights................................ S-72
Restrictions on Transfer..................... S-72
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-73
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-75
CONFLICTS OF INTEREST.......................... S-78
Conflicts of Interest with Respect to the
Offer...................................... S-78
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-78
Competition Among Properties................. S-78
Features Discouraging Potential Takeovers.... S-78
Future Exchange Offers....................... S-78
YOUR PARTNERSHIP............................... S-79
General...................................... S-79
</TABLE>
i
<PAGE> 461
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-79
Originally Anticipated Term of the
Partnership................................ S-79
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-80
Property Management.......................... S-80
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-80
Distributions................................ S-81
Beneficial Ownership of Interests in Your
Partnership................................ S-81
Compensation Paid to the General Partner and
its Affiliates............................. S-81
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-82
LEGAL MATTERS.................................. S-83
EXPERTS........................................ S-83
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 462
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Income Properties, Ltd. 6. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 463
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 464
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership has not paid distributions with respect to your units
since 1991. We will pay fixed quarterly distributions of $
per unit on the Tax-Deferral % Preferred OP Units before any
distributions are paid to holders of Tax-Deferral Common OP Units. We pay
quarterly distributions on the Tax-Deferral Common OP Units based on our
funds from operations for that quarter. For the six months ended June 30,
1998, we paid distributions of $1.125 on each of the Tax-Deferral Common OP
Units (equivalent to $2.25 on an annual basis). This is equivalent to
distributions of $ per year on the number of Tax-Deferral %
Preferred OP Units, or $ per year on the number of Tax-Deferral Common
OP Units, that you would receive in an exchange for each of your
partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 465
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $13.33 per unit to $237.00 per unit
during the period from January 1, 1997 to September 30, 1998. As of June
30, 1998, your general partner estimated the net asset value of your units
to be $394.00 per unit and an affiliate of your general partner estimated
the net liquidation value of your units to be $381.31 per unit. However, we
do not believe that these valuations represent the current fair market
value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 466
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, if you tender less than
all of your units, you must continue to hold at least three units following
our acceptance of tendered units. You may tender fractional units only if
you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
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SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$394.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $381.31 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $13.33 per unit to $237.00 per
unit for the period from January 1, 1997 to September 30, 1996.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
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deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
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DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for the ratings of AIMCO from stable to negative
to reflect its concerns surrounding AIMCO's ability to successfully implement
its financial strategy while maintaining a prudent capital structure as a result
of more difficult general capital market conditions. Moody's noted that AIMCO's
access to the public markets may prove challenging in light of the volatility in
both the equity and capital markets for REITs and assigned a "ba3" rating to the
Class I Preferred Stock proposed to be issued by AIMCO. At the same time,
Moody's confirmed its existing rating on AIMCO's preferred stock and senior
debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
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WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain
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pension trusts, registered investment companies and Mr. Considine). Our charter
also prohibits anyone from buying shares if the purchase would result in us
losing our REIT status. If you or anyone else acquires shares in excess of the
ownership limit or in violation of the ownership requirements of the Internal
Revenue Code for REITs, the transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
5.09% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your partnership
to sell its assets, distribute the net liquidation proceeds to its partners
in accordance with your partnership's agreement of limited partnership, and
then dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes,
at their option. If your partnership were to sell its assets and liquidate,
you and your partners would not need to rely upon capitalization of income
or other valuation methods to estimate the fair market value of your
partnership's assets. Instead, such assets would be valued through
negotiations with prospective purchasers. However, a liquidating sale of
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
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Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have
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the opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
S-14
<PAGE> 476
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
S-15
<PAGE> 477
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
S-16
<PAGE> 478
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $13.33 to $237.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
S-17
<PAGE> 479
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to 10% of the Net Cash From Operations (as defined
in your partnership's agreement of limited partnership) for its services as
general partner of your partnership and may receive reimbursement for expenses
incurred in such capacity. The general partner of your partnership received fees
and reimbursements totaling $157,000 for the first six months of 1998. The
property manager received management fees of $180,000 for the first six months
of 1998. We have no current intention of changing the fee structure for your
property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Income Properties, Ltd. 6 was organized on June 29, 1984, under the
laws of the State of California. Its primary business is real estate ownership
and related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following properties: Lazy Hollow
Apartments, a 178-unit apartment complex in Columbia, Maryland; Homestead
Apartments, a 168-unit apartment complex in East Lansing, Michigan; Casa Grenada
Apartments, a 108-unit apartment complex in Harlington, Texas; Mesa Dunes, a
451-pad mobile home park in Mesa, Arizona; Wakonda Shopping Center, a 147,000
square-foot commercial complex in Des Moines, Iowa; and Town & Center Shopping
Center, a 104,000 square-foot commercial complex in Cedar Rapids, Iowa.
Additionally, on July 16, 1998, the Partnership sold Whispering Pines Mobile
Home Park, a 304-pad mobile home park in Lantana, Florida to an unaffiliated
third party for $6,961,000 (net of sales commis-
S-18
<PAGE> 480
sions), resulting in approximately $1,812,000 of net proceeds to the
partnership. The general partner of your partnership is Angeles Realty
Corporation II, which is a majority-owned subsidiary of AIMCO. Insignia
Residential Group, L.P., which is a majority-owned subsidiary of AIMCO, serves
as manager of the properties owned by your partnership. As of September 15,
1998, there were 47,311 units of limited partnership interest issued and
outstanding, which were held of record by 4,140 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101. For additional information about your partnership,
please refer to the annual and quarterly reports prepared by your partnership
which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 481
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 482
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 483
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 484
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 485
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 486
SUMMARY FINANCIAL INFORMATION OF ANGELES INCOME PROPERTIES, LTD. 6
The summary financial information of Angeles Income Properties, Ltd. 6 for
the six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Angeles Income Properties, Ltd. 6 for the years ended December
31, 1997, 1996 and 1995 is based on audited financial statements. This
information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
ANGELES INCOME PROPERTIES, LTD. 6
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
---------------- --------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. 3,915 3,901 8,434 9,717 12,803
Net Income/(Loss)........................................... 218 50 836 6,106 (720)
Net income (loss) per limited partnership interest.......... 4.56 1.04 17.05 127.59 (15.06)
------ ------ ------ ------ ------
Distributions per limited partnership interest.............. -- -- -- -- --
------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------- --------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ 27,320 28,372 27,573 28,770 41,238
Total Assets................................................ 31,883 33,011 31,573 32,811 45,488
Mortgage Notes Payable, including Accrued Interest.......... 23,227 25,294 23,374 25,009 42,687
Partners' Capital/(Deficit)................................. 7,498 6,515 7,280 6,465 359
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING ANGELES INCOME PROPERTIES,
PARTNERSHIP LTD. 6
------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $0.00
</TABLE>
S-25
<PAGE> 487
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $13.33 per unit to
$237.00 per unit for the period from January 1, 1997 to September 30, 1998. As
of June 30, 1998, your general partner estimated the net asset value of your
units to be $394.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $381.31 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 488
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 489
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Your
partnership has not paid any distributions with respect to your units since
1991. Therefore, distributions with respect to the Preferred OP Units and Common
OP Units that we are offering are expected to be , immediately following
our offer, than the distributions with respect to your units. See "Comparison of
Ownership of Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
S-28
<PAGE> 490
deemed cash distribution. Although your general partner has no current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for the ratings of AIMCO from stable to negative to
reflect its concerns surrounding AIMCO's ability to successfully implement its
financial strategy while maintaining a prudent capital structure as a result of
the more difficult general capital market conditions. Moody's noted that AIMCO's
access to the public markets may prove challenging in light of the volatility in
both the equity and capital markets for REITs and assigned a "ba3" rating to the
Class I Preferred Stock proposed to be issued by AIMCO, and confirmed its
previous ratings related to AIMCO's preferred stock and debt in its shelf
registration statement. Moody's indicated that its rating action continues to
reflect AIMCO's increasing leveraged profile, including high levels of secured
debt and preferred stock, limited financial flexibility and integration risks
resulting from the merger with Insignia. Moody's also noted AIMCO's high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which AIMCO owns a general partnership interest. At the same
time, Moody's confirmed its existing rating on AIMCO's existing preferred stock
and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Residential Group,
L.P. which manages the properties owned by your partnership. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 5.09%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia
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(the "Insignia Partnerships"). Such offers would provide liquidity for the
limited partners of the Insignia Partnerships. Such offers would also allow the
AIMCO Operating Partnership an opportunity to increase its ownership interest in
certain Insignia Partnerships which would provide a larger asset and capital
base and increased diversification. As of , 1998, the AIMCO
Operating Partnership has made offers to a number of the Insignia Partnerships,
including your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In August 1998, IPT, then an affiliate of
Insignia and now our affiliate, commenced a tender offer pursuant to which it
acquired units (representing approximately % of the number
outstanding) at a cash purchase price of $235.00 per unit on , 1998.
Prior to such tender offer, Madison Partnership Liquidity Investors 64,
LLC, which was unaffiliated with Insignia and is not affiliated with AIMCO,
commenced a tender offer for $120.00 per unit and purchased units in
, 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
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Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, if you tender less than all of your units, you must continue to hold at
least three units following our acceptance of tendered units. You may tender
fractional units only if you are tendering all of your units. No alternative,
conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 1,011 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 2.14% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Lazy Hollow Apartments $ % $
Homestead Apartments
Casa Granada Apartments
Mesa Dunes Mobile Home Park
Wakonda Shopping Center
Town & Country Shopping Center
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other
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costs including required capital expenditures and deferred maintenance to derive
a net equity value for your partnership of $ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Your partnership has not paid any distributions with respect to your
units since 1991. Therefore, distributions with respect to the Preferred OP
Units and Common OP Units that we are offering are expected to be ,
immediately following our offer, than the distributions with respect to
your units. See "Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
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apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $7.70 to $237.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 4,400 units (representing less than 9.3% of
the total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to September 30, 1998, as reported by the
general partner and by The Partnership Spectrum, which is an independent,
third-party source. The gross sales prices reported by The Partnership Spectrum
do not necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices; thus the AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete. The transfer paperwork submitted
to the general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
ANGELES INCOME PROPERTIES, LTD. 6
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $105.00 $237.00 (c) (c)
Second Quarter.................................. 58.33 221.75 $175.00 $222.00
First Quarter................................... 37.00 183.00 160.00 186.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 13.33 186.30 100.00 163.00
Third Quarter................................... 40.00 190.00 152.00 190.00
Second Quarter.................................. 35.00 183.00 145.00 186.00
First Quarter................................... 25.00 184.00 130.00 183.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 25.00 187.32 172.00 184.00
Third Quarter................................... 13.50 187.00 83.00 178.00
Second Quarter.................................. 14.00 177.53 -- --
First Quarter................................... 7.70 240.00 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the
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first day of each month. The prices in the table are based solely on
information provided to the general partner by sellers and buyers of units
transferred in sale transactions (i.e., excluding transactions believed to
result from the death of a limited partner, rollover to an IRA account,
establishment of a trust, trustee to trustee transfers, termination of a
benefit plan, distributions from a qualified or non-qualified plan, uniform
gifts, abandonment of units or similar non-sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Each of your partnership's properties was appraised in 1998,
1997 and 1996 by an independent, third party appraiser, Koeppel Tenor Real
Estate Services, Inc (the "Appraiser"). According to each appraisal report, the
scope of the appraisal included an inspection of the property and an analysis of
the surrounding market. The Appraiser relied principally on the income
capitalization approach to valuation and secondarily on the sales comparison
approach, and represented that its reports were prepared in accordance with the
Code of Professional Ethics and Standards of Professional Appraisal Practice of
the Appraisal Institute and the Uniform Standards of Professional Appraisal
Practice, and in compliance with the Appraisal Standards set forth in the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (known as
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<PAGE> 515
"FIRREA"). The estimated market value of the fee simple estates of each
property specified in those appraisal reports is as listed in the chart below. A
copy of the summary of the appraisal has been filed as an exhibit to the AIMCO
Operating Partnership's Tender Offer Statement on Schedule 14D-1 filed with the
SEC.
<TABLE>
<CAPTION>
PROPERTY NAME 1998 1997 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C>
Lazy Hollow Apartments............................ $ 7,000,000 $ 7,800,000 $ 8,400,000
Homestead Apartments.............................. $ 6,000,000 $ 6,000,000 $ 5,900,000
Casa Granada Apartments........................... $ 2,400,000 $ 2,200,000 $ 2,200,000
Mesa Dunes Mobile Home Park....................... $ 9,300,000 $ 8,700,000 $ 8,500,000
Wakonda Shopping Center........................... $ 4,150,000 $ 4,050,000 $ 3,900,000
Town & Country Shopping Center.................... $ 3,550,000 $ 3,550,000 $ 3,785,000
------------ ------------ ------------
Aggregate Appraised Value......................... $ 33,300,000 $ 32,300,000 $ 32,685,000
============ ============ ============
</TABLE>
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $394.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $341.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
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STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
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similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
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CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
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In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2037. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests, conduct any business that may be lawfully conducted by
including debt interests, in residential, commercial a limited partnership organized pursuant to the
and industrial real properties either directly or Delaware Revised Uniform Limited Partnership Act (as
indirectly through partnership or joint ventures with amended from time to time, or any successor to such
others. Subject to restrictions contained in your statute) (the "Delaware Limited Partnership Act"),
partnership's agreement of limited partnership, your provided that such business is to be conducted in a
partnership may perform all acts necessary, advisable manner that permits AIMCO to be qualified as a REIT,
or convenient to the business of your partnership unless AIMCO ceases to qualify as a REIT. The AIMCO
including borrowing money and creating liens. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner, in its sole discretion, may make contributions as may be established by the general
subsequent offerings of your partnership's securities, partner in its sole discretion. The net capital
including offerings of additional units and limited contribution need not be equal for all OP Unitholders.
partnership interests. The capital contribution need No action or consent by the OP Unitholders is required
not be equal for all limited partners. The general in connection with the admission of any additional OP
partner may not issue units in exchange for property. Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership by a majority vote of Partnership may transfer assets to joint ventures,
the limited partners to terminate such employment, with limited liability companies, partnerships,
or without cause, and without penalty to your corporations, business trusts or other business
partnership, upon no greater than sixty days notice to entities in which it is or thereby becomes a
the employed party. The general partner may not participant upon such terms and subject to such
purchase or lease any real property or acquire any loan conditions consistent with the AIMCO Operating Part-
or lease from your partnership or sell or lease any nership Agreement and applicable law as the general
real property, loan or lease to your property in its partner, in its sole and absolute discretion, believes
own name and temporarily hold title thereto for the to be advisable. Except as expressly permitted by the
purpose of facilitating its acquisition or financing by AIMCO Operating Partnership Agreement, neither the
your partnership if (1) the property is purchased by general partner nor any of its affiliates may sell,
your partnership for a price no greater than the cost transfer or convey any property to the AIMCO Operating
of the property to the general partner or its Partnership, directly or indirectly, except pursuant to
affiliate, (2) no difference exists in the interest transactions that are determined by the general partner
rates of the loans secured by the property at the time in good faith to be fair and reasonable.
acquired by the general partner or its affiliates and
at the time acquired by your partnership and (3)
neither the general partner nor its affiliates receive
any economic advantage by reason of holding or having
held title to the property. Your partnership may also
lease property to a partnership sponsored by the
general partner or its affiliates so long as the terms
of the lease are comparable space and contained in a
written contract which precisely describes the subject
matter thereof and all compensation to be paid, which
contract, if not previously disclosed, must be fully
and property disclosed to all partners. If the general
partner or its affiliates sublease such space, all rent
received in excess of the rent paid to your partnership
will be paid to your partnership. Subject to certain
conditions contained in your partnership's agreement of
limited partnership, your partnership may invest the
assets of your partnership entitles affiliated with the
general partner of your partnership. Your partnership
may not make loans to the general partner or its
affiliates but the general partner and its affiliates
may lend money to your partnership
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
provided that the interest and other financing charges
on loans to your partnership may not be in excess of
amounts paid by the general partner for borrowed funds
(provided, however, that such interest rates and
charges are not in excess of rates and charges which
would be charged by unrelated lending institutions on
comparable loans for the same purpose, in the same
locality of the property (if such loan is made in
connection with a particular property). Such loans may
not require a prepayment charge or penalty if such loan
is secured by a mortgage or encumbrance of your
partnership's property. In addition, the general
partner or an affiliate may lend money to your
partnership to fund its acquisitions if your
partnership does not have sufficient cash proceed to
invest so long as: (1) such loan is made at interest
rates and charges not in excess of the rates and
charges exceed the interest rate and charges which
would be charged by unrelated lending institutions on
comparable loans for the same purpose, in the same
locality of the property (if such loan is made in
connection with a particular property), (2) your
partnership agrees to repay promptly such loan from the
offering of units, but in no event later than one year
from the date of purchase of the property, (3) such
interim financing is not in an amount that exceed 80%
of the purchase price of the property and (4) the
general partner or its affiliate agrees to purchase the
property, as promptly as practical from your
partnership at a price equal to the cost of the
property to your partnership in the event that
partnership is unable to make sufficient payments to
repay the loan for any reason. Unless certain
conditions are met, the general partner may not make a
permanent loan to your partnership nor may your
partnership finance the purchase of your partnership's
property by use of a "wraparound" or "all-inclusive"
note and mortgage or deed of trust under which the
general partner or any of its affiliates are the
obligee or secured party. Your partnership may not
grant to the general partner or its affiliates an
exclusive right or an exclusive employment to sell your
partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of all Partnership has credit agreements that restrict, among
properties, subject all such properties acquired by other things, its ability to incur indebtedness. See
your partnership to one or more mortgages, deeds of "Risk Factors -- Risks of Significant Indebtedness" in
trust or other security interests which would exceed an the accompanying Prospectus.
aggregate amount equal to 50% of the purchase price of
all properties; provided, however, that your
partnership is permitted to acquire a particular
property subject to existing secured financing and
incur new financing in connection with such acquisition
so long as the outstanding balance of such mortgage
indebtedness assumed and incurred by your acquisition
so long as the outstanding balance of such mortgage
indebtedness assumed and incurred by our partnership
does not exceed 50% of the purchase price of such
property and, if certain conditions are met, may borrow
funds from unaffiliated third parties if your
partnership does not have sufficient cash proceeds to
invest in acquisitions. The general partner may not
acquire any real property which, at the date of
acquisition is subject to, or as part of such
acquisition incur new indebtedness secured by a
mortgage, deed of trust or other security interest on
the real property (excluding short-term indebtedness)
having an aggregate unpaid principal balance
immediately after the acquisition equal to more than
50% of the purchase price of the property.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
In connection with the refinancing of properties, the
general partner of your partnership may not subject all
such properties refinanced by your partnership to one
or more mortgages or deeds of trust which would exceed
an aggregate amount equal to 80% of the aggregate value
of such properties as of the dates of such refinancing
as determined by the lender. The general partner may
not acquire a property subject to or subject a property
to financing which represents 25% or more of the
purchase price which contains a provision of a balloon
payment due and payable prior to the earlier of (1) ten
years from the date your partnership acquired the
property or (2) two years beyond the estimated holding
period for the property, but in no event prior to seven
years from the date of acquisition of the property. All
financing incurred by your partnership will generally
provide for periodic payments in an amount which would
be sufficient to self-liquidate the loans over periods
of not more than thirty years. Your partnership may not
issue debt securities to the public. No creditor who
makes a non-recourse loan to your partnership will have
or acquire at any time, as a result of making such
loan, any direct or indirect interest in the profits,
capital or property of your partnership, other than as
a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership and California law the general management power over the business and affairs of the
partner has the right, power and authority, on behalf AIMCO Operating Partnership. The OP Unitholders have
of your partnership, and in its name, to exercise all the right to vote on certain matters described under
of the rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without approval by the limited partners Units -- Voting Rights" below. The general partner may
and all the management powers over the business and not be removed by the OP Unitholders with or without
affairs of your partnership will be exclusively vested cause.
in the general partner. Limited partners have no right
to participate in the management or conduct of your In addition to the powers granted a general partner of
partnership's business or affairs nor any power or a limited partnership under applicable law or that are
authority to act for or on behalf of your partnership granted to the general partner under any other
in any respect whatsoever. provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. Notwithstanding any other provision to the settlements and other amounts incurred in connection
contrary, the general partner, its affiliates will not with any actions relating to the operations of the
be entitled to indemnity for any loss, damage or cost AIMCO Operating Partnership, as set forth in the AIMCO
resulting from violations of federal or state Operating Partnership Agreement. The Delaware Limited
securities laws unless (1) there is a successful Partnership Act provides that subject to the standards
adjudication of the merits of each count involving such and restrictions, if any, set forth in its partnership
securities law violations and the court approved agreement, a limited partnership may, and shall have
indemnification of litigation costs, (2) such claims the power to, indemnify and hold harmless any partner
have been dismissed with prejudice on the merits by a or other person from and against any and all claims and
court of competent jurisdiction and the court approves demands whatsoever. It is the position of the
indemnification of litigation costs or (3) a court of Securities and Exchange Commission that indemnification
competent jurisdiction approves a settlement of such of directors and officers for liabilities arising under
claims and the court approves indemnification of the Securities Act is against public policy and is
settlement and related costs. In any claim for unenforceable pursuant to Section 14 of the Securities
indemnification for federal or state securities law Act of 1933.
violations, the party seeking indemnification must
place before the court the position of the SEC and any
other applicable regulatory agency with respect to the
issue of indemnification for securities law violations.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner, the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership and such other conditions as are controlling interest in the AIMCO Operating Partner-
set forth in your partnership's agreement of limited ship. Additionally, the AIMCO Operating Partnership
partnership are satisfied. The general partner may Agreement contains restrictions on the ability of OP
admit additional general partners without the consent Unitholders to transfer their OP Units. See
of the limited partners. No limited partner may "Description of OP Units -- Transfers and Withdrawals"
substitute a transferee of his units in such limited in the accompanying Prospectus.
partner's place without the consent of the limited
partners. No limited partner may substitute a
transferee of his units in such limited partner's place
without the consent of the general partner which may be
withheld at the sole discretion of the general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited the general
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partners if such amendment: (1) adds to the partner may, without the consent of the OP Unitholders,
representation, duties, or obligations of the general amend the AIMCO Operating Partnership Agreement,
partner or its affiliates or surrenders any right or amendments to the AIMCO Operating Partnership Agreement
power granted to the general partner or its affiliates require the consent of the holders of a majority of the
for the benefit of the limited partner, (2) cures any outstanding Common OP Units, excluding AIMCO and
ambiguity, corrects or supplements any provision which certain other limited exclusions (a "Majority in
may be inconsistent with any other provision or makes Interest"). Amendments to the AIMCO Operating
any other provision with respect to maters or questions Partnership Agreement may be proposed by the general
arising under your partnership's agreement of limited partner or by holders of a Majority in Interest.
partnership consistent with the provisions of your Following such proposal, the general partner will
partnership's agreement of limited partnership, (3) submit any proposed amendment to the OP Unitholders.
deletes or adds any provision required by any The general partner will seek the written consent of
applicable law, (4) reflects any reduction of the the OP Unitholders on the proposed amendment or will
partners' capital accounts and (5) reflect a change in call a meeting to vote thereon. See "Description of OP
the name or the location of the principal place of Units -- Amendment of the AIMCO Operating Partnership
business of your partnership. Your partnership's agree- Agreement" in the accompanying Prospectus.
ment of limited partnership may not be amended to
change your partnership to a general partnership,
extend the term of your partnership, allow the
expulsion of the non-managing general partner without
the simultaneous expulsion of the managing general
partner or change the liability of the general partner
or the limited partners. Any amendment which diminishes
the rights of the general partner may not be made
without the consent of the general partner or all of
the limited partners. All other amendments to your
partnership's agreement of limited partnership must be
approved by the limited partners owning more than 50%
of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership is entitled to The general partner does not receive compensation for
receive 10% of the Net Cash From Operations (as defined its services as general partner of the AIMCO Operating
in your partnership's agreement of limited partnership) Partnership. However, the general partner is entitled
for its services as general partner of your partnership to payments, allocations and distributions in its
and receives reimbursement for expenses incurred in capacity as general partner of the AIMCO Operating
such capacity. Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not for the debts, negligence, no OP Unitholder has personal liability for
liabilities, or obligations of your partnership in the AIMCO Operating Partnership's debts and
excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner and its affiliates may acquire real properties Operating Partnership Agreement expressly limits the
for their own account, or engage in the acquisition, liability of the general partner by providing that the
development, operation or management of real estate on general partner, and its officers and directors will
behalf of other entities, including business ventures not be liable or accountable in damages to the AIMCO
similar to, related to or in direct or indirect Operating Partnership, the limited partners or
competition with any business of your partnership. assignees for errors in judgment or mistakes of fact or
Neither your partnership nor any other partner will law or of any act or omission if the general partner or
have any right in or to such other business ventures of such director or officer acted in good faith. See
the income or profits derived therefrom. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
AIMCO Operating Partnership may be required to pay
state income taxes in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner; ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership and holders of at least 50% of the
terminate the employment of an outstanding Preferred OP Units will Under the AIMCO Operating Partner-
affiliate of your general partner. be necessary for effecting any ship Agreement, the general partner
amendment of any of the provisions has the power to effect the
A general partner may cause the of the Partnership Unit Desig- acquisition, sale, transfer,
dissolution of your partnership by nation of the Preferred OP Units exchange or other disposition of
retiring. In such event, your that materially and adversely any assets of the AIMCO Operating
partnership may be continued by the affects the rights or preferences Partnership (including, but not
remaining general partner if, in of the holders of the Preferred OP limited to, the exercise or grant
the opinion of counsel to your Units. The creation or issuance of of any conversion, option,
partnership, such election would any class or series of partnership privilege or subscription right or
not jeopardize your partnership's units, including, without any other right available in
status as a partnership for tax limitation, any partnership units connection with any assets at any
purposes. If no general partner that may have rights senior or time held by the AIMCO Operating
remains, your partnership may superior to the Preferred OP Units, Partnership) or the merger,
continue if, within ninety days of shall not be deemed to materially consolidation, reorganization or
the retirement, the limited adversely affect the rights or other combination of the AIMCO
partners holding more than 50% of preferences of the holders of Operating Partnership with or into
the units elect a substitute Preferred OP Units. With respect to another entity, all without the
general partner who is willing to the exercise of the above de- consent of the OP Unitholders.
continue your partnership. scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partner-
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
ship by an "event of withdrawal,"
as defined in the Delaware Limited
Partnership Act (including, without
limitation, bankruptcy), unless,
within 90 days after the
withdrawal, holders of a "majority
in interest," as defined in the
Delaware Limited Partnership Act,
agree in writing, in their sole and
absolute discretion, to continue
the business of the AIMCO Operat-
ing Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in dis-
limited circum-
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
stances, no distributions may be tribute sufficient amounts to
declared or paid or set apart for enable the general partner to
payment by the AIMCO Operating transfer funds to AIMCO and enable
Partnership and no other AIMCO to pay stockholder dividends
distribution of cash or other prop- that will (i) satisfy the
erty may be declared or made, requirements for qualifying as a
directly or indirectly, by the REIT under the Code and the
AIMCO Operating Partnership with Treasury Regulations and (ii) avoid
respect to any Junior Units, nor any Federal income or excise tax
shall any Junior Units be re- liability of AIMCO. See
deemed, purchased or otherwise "Description of OP
acquired for consideration, nor Units -- Distributions" in the
shall any other cash or other accompanying Prospectus.
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fractional unit and on any securities exchange. The transferability of the OP Units.
if such assignment is less than all Preferred OP Units are subject to Until the expiration of one year
of the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
three units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment and (3) the date on which a holder of Preferred consent may be withheld in its sole
assignor and assignee have complied OP Units acquired Preferred OP and absolute discretion. After the
with such other conditions as Units, subject to certain expiration of one year, such OP
determined by the general partner exceptions, such holder of Unitholder has the right to
to comply with any state securities Preferred OP Units may not transfer transfer all or any portion of its
regulatory authority. The general all or any portion of its Pre- OP Units to any person, subject to
partner will prohibit a transfer if ferred OP Units to any transferee the satisfaction of certain
the transfer, when added to all without the consent of the general conditions specified in the AIMCO
other assignment taking place in partner, which consent may be Operating Partnership Agreement,
the preceding 12 months, in the withheld in its sole and absolute including the general partner's
opinion of counsel to your discretion. After the expiration of right of first refusal. See
partnership, would result in the one year, such holders of Preferred "Description of OP Units --
termination of your partnership for OP Units has the right to transfer Transfers and Withdrawals" in the
federal tax purposes. No transfers all or any portion of its Preferred accompanying Prospectus.
will be effective if counsel for OP Units to any person, subject to
your partnership issues an opinion the satisfaction of certain After the first anniversary of
that such transfer would be in conditions specified in the AIMCO becoming a holder of Common OP
violation of any state securities Operating Partnership Agreement, Units, an OP Unitholder has the
laws or affect the tax status of including the general partner's right, subject to the terms and
your partnership or if such right of first refusal. conditions of the AIMCO Operating
transfer would result in your Partnership Agreement, to require
partnership being treated as an After a one-year holding period, a the AIMCO Operating Partnership to
association taxable as a holder may redeem Preferred OP redeem all or a portion of the
corporation. Such transferee may be Units and receive in exchange Common OP Units held by such party
substituted as a limited partner therefor, at the AIMCO Operating in exchange for a cash amount based
if: (1) the general partner Partnership's option, (i) subject on the value of shares of Class A
consents in writing, which consent to the terms of any Senior Units, Common Stock. See "Description of
may be granted or denied in the cash in an amount equal to the OP Units -- Redemption Rights" in
sole discretion of the general Liquidation Preference of the the accompanying Prospectus. Upon
partner, (2) the transferor elects Preferred OP Units tendered for receipt of a notice of redemption,
to become a substitute limited redemption, (ii) a number of shares the AIMCO Operating Partnership
partner by delivering to the of Class I Cumulative Preferred may, in its sole and absolute
general partner a written notice, Stock of AIMCO that pay an discretion but subject to the
executed and acknowledge by the aggregate amount of dividends yield restrictions on the ownership of
assignor and assignee of such equivalent to the distributions on Class A Common Stock imposed under
election, (3) the assignee executes the Preferred OP Units tendered for AIMCO's charter and the transfer
and acknowledges such other redemption and are part of a class restrictions and other limitations
instruments that the general or series of preferred stock that thereof, elect to cause AIMCO to
partner may require including an is then listed on the New York acquire some or all of the tendered
adoption of your partnership's Stock Exchange or another national Common OP Units in
agreement of limited partnership,
and (4) the assignee pays the
partnership for its expenses
incurred in the transaction.
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
securities exchange, or (iii) a exchange for Class A Common Stock,
number of shares of Class A Common based on an exchange ratio of one
Stock of AIMCO that is equal in share of Class A Common Stock for
Value to the Liquidation Preference each Common OP Unit, subject to
of the Preferred OP Units tendered adjustment as provided in the AIMCO
for redemption. The Preferred OP Operating Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 531
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to 10%
of the Net Cash From Operations (as defined in your partnership's agreement of
limited partnership) for its services as general partner of your partnership and
receives reimbursement for expenses incurred in such capacity. The general
partner of your partnership has received fees and reimbursements totaling
$321,000 in 1996, $297,000 in 1997 and $157,000 for the first six months of
1998. The property manager received management fees of $400,000 in 1996,
$336,000 in 1997 and $180,000 for the first six months of 1998. The AIMCO
Operating Partnership has no current intention of changing the fee structure for
the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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YOUR PARTNERSHIP
GENERAL
Angeles Income Properties, Ltd. 6 was organized on June 29, 1984, under the
laws of the State of California. Its primary business is real estate ownership
and related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following properties: Lazy Hollow
Apartments, a 178-unit apartment complex in Columbia, Maryland; Homestead
Apartments, a 168-unit apartment complex in East Lansing, Michigan; Casa Grenada
Apartments, a 108-unit apartment complex in Harlington, Texas; Mesa Dunes, a
451-pad mobile home park in Mesa, Arizona; Wakonda Shopping Center, a 147,000
square-foot commercial complex in Des Moines, Iowa; and Town & Center Shopping
Center, a 104,000 square-foot commercial complex in Cedar Rapids, Iowa.
Additionally, on July 16, 1998, the Partnership sold Whispering Pines Mobile
Home Park, a 304-pad mobile home park in Lantana, Florida to an unaffiliated
third party for $6,961,000 (net of sales commissions), resulting in
approximately $1,812,000 of net proceeds to the partnership. The general partner
of your partnership is Angeles Realty Corporation II, which is a majority-owned
subsidiary of AIMCO. Insignia Residential Group, L.P., which is a majority-owned
subsidiary of AIMCO, serves as manager of the properties owned by your
partnership. As of September 15, 1998, there were 47,311 units of limited
partnership interest issued and outstanding, which were held of record by 4,140
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated July 16, 1998 and October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated July 11, 1987, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner had, on average,
begun selling their properties during the fifth or sixth year after the
investments were made and had sold all of their properties after eight years of
ownership. The prospectus further stated, however, that the general partner was
unable to predict how long the partnership would remain invested in the
properties and that the partnership acquired such properties for investment
rather than resale. In any event, according to the prospectus, the general
partner anticipated that a disposition of the properties would depend on, among
other things, the current real estate and money markets, economic climate and
income tax consequences to the limited partners. Under your partnership's
agreement of limited partnership, the term of the partnership will continue
until
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<PAGE> 541
December 31, 2037, unless sooner terminated as provided in the agreement or
by law. Limited partners could, as an alternative to tendering their units, take
a variety of possible actions, including voting to liquidate the partnership or
amending the agreement of limited partnership to authorize limited partners to
cause the partnership to merge with another entity or engage in a "roll-up" or
similar transaction.]
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. Notwithstanding any other provision to the contrary, the general
partner, its affiliates will not be entitled to indemnity for any loss, damage
or cost resulting from violations of federal or state securities laws unless (1)
there is a successful adjudication of the merits of each count involving such
securities law violations and the court approves indemnification of litigation
costs, (2) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction and the court approves indemnification of
litigation costs or (3) a court of competent jurisdiction approves a settlement
of such claims and the court approves indemnification of settlement and related
costs. In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification must place before the court
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the position of the SEC and any other applicable regulatory agency with
respect to the issue of indemnification for securities law violations.
Your partnership may not incur the cost of the portion of any insurance
which insures any party against any liability as to which such party is
prohibited from being indemnified by your partnership's agreement of limited
partnership.
DISTRIBUTIONS
Your partnership has not paid any distributions with respect to your
partnership's units since 1991. The original cost per unit was $1,002.00.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 5.09% interest in your partnership, including 1,956 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $481,463
1995........................................................ 369,379
1996........................................................ 321,000
1997........................................................ 297,000
1998 (through June 30)...................................... 157,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $286,902
1995........................................................ 420,231
1996........................................................ 400,000
1997........................................................ 336,000
1998 (through June 30)...................................... 180,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
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SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
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LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Income Properties, Ltd. 6
appearing in Angeles Income Properties, Ltd. 6 Annual Report (Form 10-KSB) for
the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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<PAGE> 545
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
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<PAGE> 546
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
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<PAGE> 547
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 548
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
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<PAGE> 549
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 550
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 551
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 552
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 553
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 554
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES OPPORTUNITY PROPERTIES, LTD.
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF THE
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF
OFFER AND TO RENDER AN OPINION AS TO THE YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND THE
PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $506.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $497.07 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in two apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 555
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Opportunity Properties, Ltd................ S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-54
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-56
Assumptions, Limitations and
Qualifications............................. S-56
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-65
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
</TABLE>
i
<PAGE> 556
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-78
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-81
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 557
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Opportunity Properties, Ltd. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 558
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $19.96 per unit for the six months
ended June 30, 1998 (equivalent to $ on an annual basis). We will pay
fixed quarterly distributions of $ per unit on the Tax-Deferral
% Preferred OP Units before any distributions are paid to holders of
Tax-Deferral Common OP Units. We pay quarterly distributions on the
Tax-Deferral Common OP Units based on our funds from operations for that
quarter. For the six months ended June 30, 1998, we paid distributions of
$1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25 on
an annual basis). This is equivalent to distributions of $ per year
on the number of Tax-Deferral % Preferred OP Units, or $ per year on
the number of Tax-Deferral Common OP Units, that you would receive in an
exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in two properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
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THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $80.00 per unit to $374.00 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, your
general partner estimated the net asset value of your units to be $506.00
per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $497.07 per unit. However, we do not
believe that these valuations represent the current fair market value of
your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
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Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, if you tender less than
all of your units, you must continue to hold at least three units following
our acceptance of tendered units. You may tender fractional units only if
you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 563
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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<PAGE> 564
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$506.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $497.07 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $80.00 per unit to $374.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
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<PAGE> 565
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages two
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
S-9
<PAGE> 566
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
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<PAGE> 567
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
4.2% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in
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significant amounts of taxable income to you and your partners. Another
option for liquidation of your investment would be to sell your units in a
private transaction. Any such sale could be at a very substantial discount
from your pro rata share of the fair market value of your partnership's
property and might involve significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
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Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
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Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
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In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $80 to $347
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives no fee
for its services as general partner of your partnership but may receive
reimbursement for expenses incurred in such capacity. The general partner of
your partnership received reimbursements of $34,000 for the first six months of
1998. The property manager received management fees of $60,000 for the first six
months of 1998. We have no current intention of changing the fee structure for
your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Opportunity Properties, Ltd. was organized on June 29, 1984, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital
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appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following two
residential apartment complexes: Lake Meadows Apartments, a 96 unit complex in
Garland, Texas; and Lakewood Apartments, a 256 unit complex in Houston, Texas.
The general partner of your partnership is Angeles Realty Corporation II, which
is a majority-owned subsidiary of AIMCO. Insignia Residential Group, LP., which
is a majority-owned subsidiary of AIMCO, serves as manager of the properties
owned by your partnership. As of September 15, 1998, there were 12,245 units of
limited partnership interest issued and outstanding, which were held of record
by 1,704 limited partners. Your partnership's principal executive offices are
located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and
its telephone number at that address is (303) 757-8101. For additional
information about your partnership, please refer to the annual and quarterly
reports prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
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SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 577
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 578
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 579
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 580
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 581
SUMMARY FINANCIAL INFORMATION OF ANGELES OPPORTUNITY PROPERTIES, LTD.
The summary financial information of Angeles Opportunity Properties, Ltd.
for the six months ended June 30, 1998 and 1997 is unaudited. The summary
financial information for Angeles Opportunity Properties, Ltd. for the years
ended December 31, 1997, 1996, and 1995 is based on audited financial
statements. This information should be read in conjunction with such financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" incorporated by
reference herein.
ANGELES OPPORTUNITY PROPERTIES, LTD.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------
1998 1997 1997 1996 1995
------ ------ ------- ------ -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues......................................... $1,226 $1,180 $ 2,399 $2,747 $ 3,231
Net Income (Loss)...................................... 165 160 314 535 1,067
Net income (Loss) per limited partnership unit......... 13.12 12.72 25.03 31.55 85.02
Distributions per limited partnership unit............. 19.96 95.61 155.37 23.90 278.87
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ----------------------------------
1998 1997 1997 1996 1995
------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation........... $6,284 $6,436 $ 6,380 $6,445 $ 6,635
Total Assets........................................... 7,575 8,260 7,759 9,304 8,420
Notes Payable.......................................... 5,423 5,441 5,432 5,450 4,349
Partners' Capital...................................... 1,910 2,592 1,995 3,642 3,548
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING ANGELES OPPORTUNITY
PARTNERSHIP PROPERTIES, LTD.
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $19.96 $155.37
</TABLE>
S-25
<PAGE> 582
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $80.00 per unit to
$374.00 per unit from January 1997 to September 30, 1998. As of June 30, 1998,
your general partner estimated the net asset value of your units to be $506.00
per unit. However, we do not believe that these valuations represent the current
fair market value of your units. We have retained Stanger to conduct an analysis
of our offer and to render an opinion as to the fairness to you of our offer
consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $497.07 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 583
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
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RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a two properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ , current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the six months ended June 30, 1998
were $19.96 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
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RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
properties owned by your partnership. Through subsidiaries, AIMCO currently
owns, in the aggregate, approximately a 4.2% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia
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(the "Insignia Partnerships"). Such offers would provide liquidity for the
limited partners of the Insignia Partnerships. Such offers would also allow the
AIMCO Operating Partnership an opportunity to increase its ownership interest in
certain Insignia Partnerships which would provide a larger asset and capital
base and increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In August 1998, IPT, then an affiliate of
Insignia and now our affiliate, commenced a tender offer pursuant to which 850
units (representing approximately 6.8% of the number outstanding) have been
tendered at a cash purchase price of $325.00 per unit as of October 16, 1998.
Prior to such tender offer, Madison Partnership Liquidity Investors 64,
LLC, which was unaffiliated with Insignia and is not affiliated with AIMCO,
commenced a tender offer for $200.00 per unit and purchased units in
, 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
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Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, if you tender less than all of your units, you must continue to hold at
least three units following our acceptance of tendered units. You may tender
fractional units only if you are tendering all of your units. No alternative,
conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998, (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998, (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 1,252 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 6.3% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
S-43
<PAGE> 600
filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.]
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
S-46
<PAGE> 603
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
- -------- ---------------- -------------- --------------
<S> <C> <C> <C>
Lake Meadows Apartments.......... $-- --% $--
Lakewood Apartments.............. $-- --% $--
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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<PAGE> 606
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ , current annualized distributions with respect to the
Common OP Units are $2.25, and distributions with respect to your units for
the six months ended June 30, 1998 were $19.96 (equivalent to $ on an
annualized basis). This is equivalent to distributions of $ per year
on the number of tax-deferral % Preferred OP Units, or distributions
of $ per year on the number of tax deferral Common OP Units, that you
would receive in exchange for each of your partnership's units. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-51
<PAGE> 608
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C> <C> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $80.00 to $374.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 435 units (representing less than 4.3% of the
total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to June 30, 1998, as reported by the
general partner and by The Partnership Spectrum, which is an independent,
third-party source. The gross sales prices reported by The Partnership Spectrum
do not necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices; thus the AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete. The transfer paperwork submitted
to the general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
ANGELES OPPORTUNITY PROPERTIES, LTD.
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- -----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................ $110.00 $318.00 (d) (d)
Second Quarter............................... 80.00 175.00 (c) (c)
First Quarter................................ 143.00 211.00 (c) (c)
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................... 347.00 347.00 (c) (c)
Third Quarter................................ 210.00 295.00 $295.00 $295.00
Second Quarter............................... 100.00 305.00 347.00 347.00
First Quarter................................ 100.00 299.00 243.00 305.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................... 173.00 297.00 244.00 299.00
Third Quarter................................ 76.00 266.00 173.00 235.00
Second Quarter............................... 150.00 150.00 -- --
First Quarter................................ 117.77 221.00 -- --
</TABLE>
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(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the
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first day of each month. The prices in the table are based solely on
information provided to the general partner by sellers and buyers of units
transferred in sale transactions (i.e., excluding transactions believed to
result from the death of a limited partner, rollover to an IRA account,
establishment of a trust, trustee to trustee transfers, termination of a
benefit plan, distributions from a qualified or non-qualified plan, uniform
gifts, abandonment of units or similar non-sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) No Units were reported by The Partnership Spectrum as having been sold
during the quarter.
(d) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Lakewood Apartments was appraised in May, 1996 by an
independent, third party appraiser, Koeppel Tener Real Estate Services, Inc.
(the "Appraiser"), in connection with a refinancing of the property. According
to the appraisal report, the scope of the appraisal included an inspection of
the property and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the
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Appraisal Standards set forth in the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 (known as "FIRREA"). The estimated market
value of the fee simple estate of the property specified in that appraisal
report was $6,800,000. A copy of the summary of the appraisal has been filed as
an exhibit to the AIMCO Operating Partnership's Tender Offer Statement on
Schedule 14D-1 filed with the SEC. Independent appraisals have not been
conducted for any of the partnership's other properties in the past three years.
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $506.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $489.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
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The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and
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discussed with property management personnel conditions in local apartment
rental markets and market conditions for sales and acquisitions of properties
similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not
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performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of your partnership. Stanger relied upon the
representations of your partnership and AIMCO concerning, among other things,
any environmental liabilities, deferred maintenance and estimated capital
expenditure and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of your partnership, the
allocation of your partnership's net values between the general partner, special
limited partner and limited partners of your partnership, the terms and
conditions of any debt encumbering the partnership's properties, and the
transaction costs and fees associated with a sale of the properties. Stanger
also relied upon the assurance of your partnership, AIMCO, and the management of
the partnership's properties that any financial statements, budgets, pro forma
statements, projections, capital expenditure estimates, debt, value estimates
and other information contained in this Prospectus Supplement or provided or
communicated to Stanger were reasonably prepared and adjusted on bases
consistent with actual historical experience, are consistent with the terms of
your partnership's agreement of limited partnership, and reflect the best
currently available estimates and good faith judgments; that no material changes
have occurred in the value of the partnership's properties or other balance
sheet assets and liabilities or other information reviewed between the date of
such information provided and the date of the Fairness Opinion; that your
partnership, AIMCO, and the management of the partnership's properties are not
aware of any information or facts that would cause the information supplied to
Stanger to be incomplete or misleading; that the highest and best use of the
partnership's properties is as improved; and that all calculations were made in
accordance with the terms of your partnership's agreement of limited
partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
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COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests, conduct any business that may be lawfully conducted by
including debt interest, in residential commercial and a limited partnership organized pursuant to the
industrial real properties either directly or Delaware Revised Uniform Limited Partnership Act (as
indirectly through partnerships or joint ventures with amended from time to time, or any successor to such
others and to acquire mortgage-backed securities as an statute) (the "Delaware Limited Partnership Act"),
integral part of the foregoing acquisitions. Subject to provided that such business is to be conducted in a
restrictions contained in your partnership's agreement manner that permits AIMCO to be qualified as a REIT,
of limited partnership, your partnership may perform unless AIMCO ceases to qualify as a REIT. The AIMCO
all acts necessary, advisable or convenient to the Operating Partnership is authorized to perform any and
business of your partnership including borrowing money all acts for the furtherance of the purposes and
and creating liens. business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner, in its sole discretion, may make contributions as may be established by the general
subsequent offerings of your partnership's securities, partner in its sole discretion. The net capital
including offerings of additional units and limited contribution need not be equal for all OP Unitholders.
partnership interests. The capital contribution need No action or consent by the OP Unitholders is required
not be equal for all limited partners and no action or in connection with the admission of any additional OP
consent is required in connection with the admission of Unitholder. See "Description of OP Units -- Management
any additional limited partners. The general partner by the AIMCO GP" in the accompanying Prospectus.
may not issue units in exchange for property. Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, the general partner may appoint, employ or funds or other assets to its subsidiaries or other
contract any person, including affiliates for the persons in which it has an equity investment, and such
account of your partnership for the transaction of the persons may borrow funds from the AIMCO Operating
business of your partnership. However, the terms of Partnership, on terms and conditions established in the
employment will allow your partnership, by majority sole and absolute discretion of the general partner. To
vote of the limited partners to modify or terminate the extent consistent with the business purpose of the
such employment, with or without cause, and without AIMCO Operating Partnership and the permitted
penalty to your partnership, upon no greater than sixty activities of the general partner, the AIMCO Operating
days notice to the employed party. The general partner Partnership may transfer assets to joint ventures,
may not purchase or lease any real property or acquire limited liability companies, partnerships,
any loan or lease from your partnership or sell or corporations, business trusts or other business
lease any real property, loan or lease to your entities in which it is or thereby becomes a
partnership either directly or through an affiliate. participant upon such terms and subject to such
However, the general partner or an affiliate may conditions consistent with the AIMCO Operating Part-
purchase property in its own name and temporarily hold nership Agreement and applicable law as the general
title thereto for the purpose of facilitating its partner, in its sole and absolute discretion, believes
acquisition or financing by your partnership if (1) the to be advisable. Except as expressly permitted by the
property is purchased by your partnership for a price AIMCO Operating Partnership Agreement, neither the
no greater than the cost of the property to the general general partner nor any of its affiliates may sell,
partner or its affiliate, (2) no difference exists in transfer or convey any property to the AIMCO Operating
the interest rates of the loans secured by the property Partnership, directly or indirectly, except pursuant to
at the time acquired by the general partner or its transactions that are determined by the general partner
affiliates and at the time acquired by your partnership in good faith to be fair and reasonable.
and (3) neither the general partner nor its affiliates
receive any economic advantage by reason of holding or
having held title to the property. Your partnership may
also lease property to a partnership sponsored by the
general partner or its affiliates so long as the terms
of the lease are comparable to, or no less favorable to
your partnership than those offered to and accepted by
unrelated persons for comparable space and contained in
a written contract which precisely describes the
subject matter thereof and all compensation to be paid,
which contract, if not previously disclosed, must be
fully and properly disclosed to all partners. If the
general partner or its affiliates sublease such space,
all rent received by them in excess of the rent paid to
your partnership will be paid to your partnership.
Subject to certain conditions contained in your
partnership's agreement of limited partnership, your
partnership may invest the assets of your partnership
in entities affiliated with the general partner of your
partnership. Your partnership may not make loans to the
general partner or its affiliates but the general
partner and its affiliates
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
may lend money to your partnership to fund its
acquisitions if (1) such loan is made at interest rates
and charges not in excess of the rates and charges then
currently being paid by the lender for the borrowed
funds, but in no event may the interest rate and
charges exceed the interest rate and charges which
would be charged by unrelated lending institutions on
comparable loans for the same purpose, in the same
locality of the property (if such loan is made in
connection with a particular property), (2) your
partnership agrees to repay promptly such loan from the
offering of units, but in no event later than one year
from the date of purchase of the property, (3) such
interim financing is not in an amount that exceed 80%
of the purchase price of the property and (4) the
general partner or its affiliates agree to purchase the
property, as promptly as practical from your
partnership at a price equal to the cost of the
property to your partnership in the event that your
partnership is unable to make sufficient payments to
repay the loan for any reason. The general partner or
any affiliate who lends money to your partnership may
not require prepayment changes or penalties if the loan
is secured by a mortgage or encumbrance on your
partnership's property or permit a permanent loan to be
made to your partnership. Unless certain conditions are
met, your partnership may not finance the purchase of
your partnership's property by use of a "wraparound" or
"all-inclusive" note and mortgage or deed of trust
under which the general partner or any of its
affiliates is the obligee or secured party. Your
partnership may not grant to the general partner or its
affiliates an exclusive right or an exclusive
employment to sell your partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of real Partnership has credit agreements that restrict, among
property, subject all such properties acquired by your other things, its ability to incur indebtedness. See
partnership to one or more mortgages or deeds of trust "Risk Factors -- Risks of Significant Indebtedness" in
which would exceed an aggregate amount equal to 80% of the accompanying Prospectus.
the purchase price of all properties. In addition,
subject to certain exceptions, the general partner may
not acquire a property subject to or subject a property
to financing which contains a provision for a balloon
payment due and payable prior to the earlier of (1) ten
years from the date your partnership acquires the
property or (2) two years beyond the estimated holding
period for the property, but in no event prior to seven
years from the date of acquisition of the property. All
financing incurred by your partnership will generally
provide for periodic payments in an amount which would
be sufficient to self-liquidate the loans over periods
of not more than thirty years. Your partnership may not
issue debt securities to the public. No creditor who
makes a non-recourse loan to your partnership will have
or acquire at any time, as a result of making such
loan, any direct or indirect interest in the profits,
capital or property of your partnership, other than as
a secured creditor.
</TABLE>
S-61
<PAGE> 618
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, and California law the general management power over the business and affairs of the
partner has the right, power and authority, on behalf AIMCO Operating Partnership. The OP Unitholders have
of your partnership, and in its name, to exercise all the right to vote on certain matters described under
of the rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without approval by the limited partners. Units -- Voting Rights" below. The general partner may
Limited partners have no right to participate in the not be removed by the OP Unitholders with or without
management or conduct of your partnership's business or cause.
affairs nor any power or authority to act for or on
behalf of your partnership in any respect whatsoever. In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. Notwithstanding any other provision to the settlements and other amounts incurred in connection
contrary, the general partner, its affiliates will not with any actions relating to the operations of the
be entitled to indemnity for any loss, damage or cost AIMCO Operating Partnership, as set forth in the AIMCO
resulting from violations of federal or state Operating Partnership Agreement. The Delaware Limited
securities laws unless (1) there is a successful Partnership Act provides that
adjudication of the merits of each
</TABLE>
S-62
<PAGE> 619
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
count involving such securities law violations and the subject to the standards and restrictions, if any, set
court approves indemnification of such litigation forth in its partnership agreement, a limited
expenses, (2) such claims have been dismissed with partnership may, and shall have the power to, indemnify
prejudice on the merits by a court of competent and hold harmless any partner or other person from and
jurisdiction and the court approves indemnification of against any and all claims and demands whatsoever. It
such litigation expenses or (3) a court of competent is the position of the Securities and Exchange Commis-
jurisdiction approves a settlement of such claims and sion that indemnification of directors and officers for
finds that indemnification of the settlement and liabilities arising under the Securities Act is against
related costs should be made. In any claim for public policy and is unenforceable pursuant to Section
indemnification for federal or state securities law 14 of the Securities Act of 1933.
violations, the party seeking indemnification must
place before the court the position of the SEC and any
other applicable regulatory agency with respect to the
issue of indemnification for securities law violations.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units once a substitute partner may not be removed as general partner of the
general partner is admitted. A substitute general part- AIMCO Operating Partnership by the OP Unitholders with
ner may be admitted with the consent of the general or without cause. Under the AIMCO Operating Partnership
partner if such party consents to become a general Agreement, the general partner may, in its sole
partner, the limited partners holding more than 50% of discretion, prevent a transferee of an OP Unit from
the outstanding units consent to the admission of the becoming a substituted limited partner pursuant to the
substitute general partner and the substitute general AIMCO Operating Partnership Agreement. The general
partner executes and acknowledges such instruments as partner may exercise this right of approval to deter,
the general partner deems necessary or advisable, delay or hamper attempts by persons to acquire a
including the adoption of your partnership's agreement controlling interest in the AIMCO Operating Partner-
of limited partnership. The general partner may admit ship. Additionally, the AIMCO Operating Partnership
additional general partners without the consent of the Agreement contains restrictions on the ability of OP
limited partners. No limited partner may substitute a Unitholders to transfer their OP Units. See
transferee of his units in such limited partner's place "Description of OP Units -- Transfers and Withdrawals"
without the consent of the general partner which may be in the accompanying Prospectus.
withheld at the sole discretion of the general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership, (3) deletes or adds any provision required the OP Unitholders. The general partner will seek the
by any applicable law, (4) reflects any reduction of written consent of the OP Unitholders on the proposed
the partners' capital accounts and (5) reflects a amendment or will call a meeting to vote thereon. See
change in the name or the location of the principal "Description of OP Units -- Amendment of the AIMCO
place of business of your partnership. Your Operating Partnership Agreement" in the accompanying
partnership's agreement of limited partnership may not Prospectus.
be amended to change your partnership to a general
partnership, extend the term of your partnership, allow
the expulsion of the non-managing general partner
without the simultaneous expulsion of the managing
general partner or change the liability of the general
partner or the limited partners. Any amendment which
diminishes the rights of the general partner may not be
made without the consent of the general partner or all
of the limited partners. All other amendments to your
partnership's agreement of limited partnership must be
approved by the limited partners owning more than 50%
of the units.
</TABLE>
S-63
<PAGE> 620
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership receives no fee The general partner does not receive compensation for
for its services as general partner, but may receive its services as general partner of the AIMCO Operating
reimbursement for expenses incurred in such capacity. Partnership. However, the general partner is entitled
to payments, allocations and distributions in its
capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is liable not for the negligence, no OP Unitholder has personal liability for
debts, liabilities, or obligations of your partnership the AIMCO Operating Partnership's debts and
in excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership. The general partner such terms as the general partner, in its sole and
may delegate any or all of its powers, rights and absolute discretion, believes are advisable. The AIMCO
obligations under your partnership's agreement of Operating Partnership Agreement expressly limits the
limited partners and in furtherance of any such liability of the general partner by providing that the
delegation may appoint, employ or contract with any general partner, and its officers and directors will
person for the account of your partnership for the not be liable or accountable in damages to the AIMCO
transaction of the business of your partnership, which Operating Partnership, the limited partners or
person may, under the supervision of the general assignees for errors in judgment or mistakes of fact or
partner, perform such acts or services for your law or of any act or omission if the general partner or
partnership as the general partnership may approve. The such director or officer acted in good faith. See
general partner may not commingle funds of your "Description of OP Units -- Fiduciary Responsibilities"
partnership with any other person. The general partner in the accompanying Prospectus.
and its affiliates may acquire real properties for
their own account, or engage in the acquisition,
development, operation or management of real estate on
behalf of other entities, including business
</TABLE>
S-64
<PAGE> 621
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ventures similar to, related to or in direct or
indirect competition with any business of your
partnership. However, if your partnership has funds
available for investment, the general partner and its
affiliates will grant a right of first refusal to your
partnership for those real property investment
opportunities which meet your partnership's investment
objectives and policies before they acquire these
properties for their own account. Neither your partner-
ship nor any other partner will have any right in or to
such other business ventures or the income or profits
derived therefrom.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS REFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quar-
</TABLE>
S-65
<PAGE> 622
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
terly cash distribution at a rate Operating Partnership Agreement) to
of $ per Preferred OP Unit, the partners of the AIMCO Operating
subject to adjustments from time to Partnership. To the extent the
time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner; ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership and holders of at least 50% of the
terminate an employment contract outstanding Preferred OP Units will Under the AIMCO Operating Partner-
with an affiliate of the general be necessary for effecting any ship Agreement, the general partner
partner. amendment of any of the provisions has the power to effect the
of the Partnership Unit Desig- acquisition, sale, transfer,
A general partner may cause the nation of the Preferred OP Units exchange or other disposition of
dissolution of your partnership by that materially and adversely any assets of the AIMCO Operating
retiring. In such event, your affects the rights or preferences Partnership (including, but not
partnership may be continued by the of the holders of the Preferred OP limited to, the exercise or grant
remaining general partner if, in Units. The creation or issuance of of any conversion, option,
the opinion of counsel to your any class or series of partnership privilege or subscription right or
partnership, such election would units, including, without any other right available in
not jeopardize your partnership's limitation, any partnership units connection with any assets at any
status as a partnership for tax that may have rights senior or time held by the AIMCO Operating
purposes. If no general partner superior to the Preferred OP Units, Partnership) or the merger,
remains, your partnership may shall not be deemed to materially consolidation, reorganization or
continue if, within ninety days of adversely affect the rights or other combination of the AIMCO
the retirement, the limited preferences of the holders of Operating Partnership with or into
partners holding more than 50% of Preferred OP Units. With respect to another entity, all without the
the units elect a substitute the exercise of the above de- consent of the OP Unitholders.
general partner who is willing to scribed voting rights, each
continue your partnership. Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution
</TABLE>
S-66
<PAGE> 623
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
and Winding Up" in the accompanying
Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations are to be made quarterly provided, however, that at any time portion as the general partner may
to the partners in proportion to and from time to time on or after in its sole and absolute discretion
the interests in your partnership. the fifth anniversary of the issue determine, of Available Cash (as
The distributions payable to the date of the Preferred OP Units, the defined in the AIMCO Operating
partners are not fixed in amount AIMCO Operating Partnership may Partnership Agreement) generated by
and depend upon the operating adjust the annual distribution rate the AIMCO Operating Partnership
results and net sales or refi- on the Preferred OP Units to the during such quarter to the general
nancing proceeds available from the lower of (i) % plus the annual partner, the special limited
disposition of your partnership's interest rate then applicable to partner and the holders of Common
assets. U.S. Treasury notes with a maturity OP Units on the record date
of five years, and (ii) the annual established by the general partner
dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
S-67
<PAGE> 624
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fraction unit and if on any securities exchange. The transferability of the OP Units.
such assignment is less than all of Preferred OP Units are subject to Until the expiration of one year
the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
three units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignment taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any person, subject to
your partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor without the consent of the general conditions specified in the AIMCO
receives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have complied with discretion. After the expiration of right of first refusal. See
such other conditions as deter- one year, such holders of Preferred "Description of OP Units --
mined by the general partner to OP Units has the right to transfer Transfers and Withdrawals" in the
comply with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to any person, subject to
transferee may be substituted as a the satisfaction of certain After the first anniversary of
limited partner if: (1) the general conditions specified in the AIMCO becoming a holder of Common OP
partner consents in writing, which Operating Partnership Agreement, Units, an OP Unitholder has the
consent may be granted or denied in including the general partner's right, subject to the terms and
the sole discretion of the general right of first refusal. conditions of the AIMCO Operating
partner, (2) the transferor elects Partnership Agreement, to require
to become a substitute limited After a one-year holding period, a the AIMCO Operating Partnership to
partner by delivering to the holder may redeem Preferred OP redeem all or a portion of the
general partner a written notice, Units and receive in exchange Common OP Units held by such party
executed and acknowledge by the therefor, at the AIMCO Operating in exchange for a cash amount based
assignor and assignee of such Partnership's option, (i) subject on the value of shares of Class A
election, (3) the assignee executes to the terms of any Senior Units, Common Stock. See "Description of
and acknowledges such other cash in an amount equal to the OP Units -- Redemption Rights" in
instruments that the general Liquidation Preference of the the accompanying Prospectus. Upon
partner may require including an Preferred OP Units tendered for receipt of a notice of redemption,
adoption of your partnership's redemption, (ii) a number of shares the AIMCO Operating Partnership
agreement of limited partnership, of Class I Cumulative Preferred may, in its sole and absolute
and (4) the assignee pays the Stock of AIMCO that pay an discretion but subject to the
partnership for its expenses aggregate amount of dividends yield restrictions on the ownership of
incurred in the transaction. equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 626
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 627
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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<PAGE> 629
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives no fee for its services as general partner of your
partnership but may receive reimbursement for expenses incurred in such
capacity. The general partner of your partnership received reimbursements of
$144,000 in 1996, $94,000 in 1997 and $34,000 for the first six months of 1998.
The property manager received management fees of $107,000 in 1996, $117,000 in
1997 and $60,000 for the first six months of 1998. The AIMCO Operating
Partnership has no current intention of changing the fee structure for the
manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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<PAGE> 634
YOUR PARTNERSHIP
GENERAL
Angeles Opportunity Properties, Ltd. was organized on June 29, 1984, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following two
residential apartment complexes: Lake Meadows Apartments, a 96 unit complex in
Garland, Texas; and Lakewood Apartments, a 256 unit complex in Houston, Texas.
The general partner of your partnership is Angeles Realty Corporation II, which
is a majority-owned subsidiary of AIMCO. Insignia Residential Group, LP., which
is a majority-owned subsidiary of AIMCO, serves as manager of the properties
owned by your partnership. As of September 15, 1998, there were 12,245 units of
limited partnership interest issued and outstanding, which were held of record
by 1,704 limited partners. Your partnership's principal executive offices are
located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and
its telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated June 26, 1987, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that opportunities
for refinancing, sale or other disposition will be available for most of is
properties within three to five years of acquisition. Under your partnership's
agreement of limited partnership, the term of the partnership will continue
until December 31, 2035, unless sooner terminated as provided in the agreement
or by law. Limited partners could, as an alternative to tendering their units,
take a variety of possible actions, including voting to liquidate the
partnership or amending the agreement of limited partnership to authorize
limited partners to cause the partnership to merge with another entity or engage
in a "roll-up" or similar transaction.]
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each
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<PAGE> 635
asset's operating performance and continuously evaluates the physical
improvement requirements. In addition, the financing structure for each
property, tax implications and the investment climate are all considered. Any of
these factors, and possibly others, could potentially contribute to any decision
by the general partner to sell, refinance, upgrade with capital improvements or
hold a particular partnership property. Based on the above considerations, the
general partner has determined that it is not in the best interests of limited
partners to sell or refinance any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceedings and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. Notwithstanding any other provision to the contrary, the general
partner, its affiliates will not be entitled to indemnity for any loss, damage
or cost resulting from violations of federal or state securities laws unless (1)
there is a successful adjudication of the merits of each count involving such
securities law violations and the court approves indemnification of such
litigation expenses, (2) such claims have been dismissed with prejudice on the
merits by a court of competent jurisdiction and the court approves
indemnification of such litigation expenses or (3) a court of competent
jurisdiction approves a settlement of such claims and finds that indemnification
of the settlement and related costs should be made. In any claim for
indemnification for federal or state securities law violations, the party
seeking indemnification must place before the court the position of the SEC and
any other applicable regulatory agency with respect to the issue of
indemnification for securities law violations.
Your partnership may not incur the cost of the portion of any insurance
which insures any party against any liability as to which such party is
prohibited from being indemnified by your partnership's agreement of limited
partnership.
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DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $1,000.00.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $278.87
January 1, 1996 - December 31, 1996......................... 23.90
January 1, 1997 - December 31, 1997......................... 155.37
January 1, 1998 - June 30, 1998............................. 19.96
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 4.26% interest in your partnership, including 405 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. In addition to the tender offers described under "Background and
Reasons for the Offer -- Previous Tender Offers." Except as set forth above,
neither the AIMCO Operating Partnership, nor, to the best of its knowledge, any
of its affiliates, (i) beneficially own or have a right to acquire any units,
(ii) have effected any transactions in the units in the past 60 days, or (iii)
have any contract, arrangement, understanding or relationship with any other
person with respect to any securities of your partnership, including, but not
limited to, contracts, arrangements, understandings or relationships concerning
transfer or voting thereof, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving or withholding
of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $167,203
1995........................................................ 144,558
1996........................................................ 144,000
1997........................................................ 94,000
1998 (through June 30)...................................... 34,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $112,862
1995........................................................ 107,746
1996........................................................ 107,000
1997........................................................ 117,000
1998 (through June 30)...................................... 60,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
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SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT Merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of
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<PAGE> 638
AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has previously
performed certain legal services on behalf of AIMCO and the AIMCO Operating
Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Opportunity Properties,
Ltd. appearing in Angeles Opportunity Properties, Ltd. Annual Report (Form
10-KSB) for the year ended December 31, 1997, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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<PAGE> 639
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
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<PAGE> 640
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
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<PAGE> 641
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 642
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 643
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 644
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 645
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 646
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 647
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 648
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES PARTNERS VII
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of December 31, 1997, your general
partner estimated the net asset value of your units to be $272.00 per
unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a single apartment property to holding an
interest in our large portfolio of properties. In the future, the
property owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 649
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-15
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-17
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Partners VII............................... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-32
Terms of the Offer; Expiration Date.......... S-32
Acceptance for Payment and Payment for
Units...................................... S-32
Procedure for Tendering Units................ S-33
Withdrawal Rights............................ S-36
Extension of Tender Period; Termination;
Amendment.................................. S-36
Proration.................................... S-37
Fractional OP Units.......................... S-37
Future Plans of the AIMCO Operating
Partnership................................ S-37
Voting by the AIMCO Operating Partnership.... S-38
Dissenters' Rights........................... S-38
Conditions of the Offer...................... S-38
Effects of the Offer......................... S-40
Certain Legal Matters........................ S-41
Fees and Expenses............................ S-43
Accounting Treatment......................... S-43
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-44
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-44
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-44
Tax Consequences of Exchanging Units Solely
for Cash................................... S-45
Adjusted Tax Basis........................... S-45
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-46
Passive Activity Losses...................... S-46
Foreign Offerees............................. S-47
VALUATION OF UNITS............................. S-47
FAIRNESS OF THE OFFER.......................... S-48
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-48
Fairness to Unitholders who Tender their
Units...................................... S-49
Fairness to Unitholders who do not Tender
their Units................................ S-50
Comparison of Consideration to Alternative
Consideration.............................. S-50
Allocation of Consideration.................. S-52
STANGER ANALYSIS............................... S-53
Experience of Stanger........................ S-53
Summary of Materials Considered.............. S-53
Summary of Reviews........................... S-54
Conclusions.................................. S-55
Assumptions, Limitations and
Qualifications............................. S-55
Compensation and Material Relationships...... S-56
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-58
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-63
DESCRIPTION OF PREFERRED OP UNITS.............. S-66
General...................................... S-66
Ranking...................................... S-66
Distributions................................ S-66
Allocation................................... S-67
Liquidation Preference....................... S-67
Redemption................................... S-68
Voting Rights................................ S-68
Restrictions on Transfer..................... S-68
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-69
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-71
CONFLICTS OF INTEREST.......................... S-74
Conflicts of Interest with Respect to the
Offer...................................... S-74
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-74
Competition Among Properties................. S-74
Features Discouraging Potential Takeovers.... S-74
Future Exchange Offers....................... S-74
YOUR PARTNERSHIP............................... S-75
General...................................... S-75
</TABLE>
i
<PAGE> 650
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-75
Originally Anticipated Term of the
Partnership................................ S-75
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-75
Property Management.......................... S-76
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-76
Distributions................................ S-76
Beneficial Ownership of Interests in Your
Partnership................................ S-77
Compensation Paid to the General Partner and
its Affiliates............................. S-77
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-77
LEGAL MATTERS.................................. S-78
EXPERTS........................................ S-78
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 651
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Partners VII. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty
Corporation, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
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<PAGE> 652
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 653
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $15.11 per unit for the six months
ended June 30, 1998 (equivalent to $ on an annual basis). We will pay
fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a single property to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
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<PAGE> 654
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $20.00 per unit to $100.00 per unit
from January 1, 1997 to September 30, 1998. As of December 31, 1997, your
general partner estimated the net asset value of your units to be $272.00
per unit. However, we do not believe that this valuation represents the
current fair market value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
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<PAGE> 655
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, if you tender less than
all of your units, you must hold at least five units following our
acceptance of tendered units. You may tender fractional units only if you
are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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<PAGE> 656
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 657
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 658
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's property may outperform our larger, more diversified portfolio of
assets. Although we cannot predict the future value of your partnership's
property, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of December
31, 1997, your general partner estimated the net asset value of your units to be
$272.00 per unit. However, we do not believe that this valuation represents the
current fair market value of your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $20.00 per unit to $100.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
S-8
<PAGE> 659
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a single
property to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the
S-9
<PAGE> 660
holders of OP Units. Such securities could have priority over the OP Units as to
cash flow, distributions and liquidation proceeds. The effect of any such
issuance may be to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our
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investors unless certain financial tests or other criteria are satisfied. In
some cases, our subsidiaries are subject to similar provisions, which may
restrict their ability to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
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POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
1.14% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your partnership
to sell its assets, distribute the net liquidation proceeds to its partners
in accordance with your partnership's agreement of limited partnership, and
then dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes,
at their option. If your partnership were to sell its assets and liquidate,
you and your partners would not need to rely upon capitalization of income
or other valuation methods to estimate the fair market value of your
partnership's assets. Instead, such assets would be valued through
negotiations with prospective purchasers. However, a liquidating sale of
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
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Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have
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the opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
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Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
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THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
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FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $20.00 to $100.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO
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Operating Partnership cannot remove the general partner. Also, your
partnership is limited as to the number of limited partner interests it may
issue while the AIMCO Operating Partnership has no such limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership is entitled to
receive an annual management fee equal to 7 1/2% of the Net Cash from Operations
for each year payable quarterly for its services as general partner and
reimbursement for expenses incurred in such capacity. The general partner of
your partnership received fees and reimbursements totaling $46,000 for the six
months ended June 30, 1998. The property manager received management fees of
$31,000 for the first six months of 1998. We have no current intention of
changing the fee structure for your property manager.
Competition Among Properties. Your partnership's property and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Partners VII was organized on January 1, 1977, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of one residential apartment complex:
Cedarwood Apartments, a 226-unit complex in Gretna, Louisiana. The general
partner of your partnership is Angeles Realty Corporation, which is a
majority-owned subsidiary of AIMCO. Insignia Residential Group, which is a
majority-owned subsidiary of AIMCO, serves as manager of the property owned by
your partnership. As of September 15, 1998, there were 8,669 units of limited
partnership interest issued and outstanding, which were held of record by 873
limited partners. Your
S-18
<PAGE> 669
partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone number at
that address is (303) 757-8101. For additional information about your
partnership, please refer to the annual and quarterly reports prepared by your
partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 670
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995 and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 671
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 672
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 673
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 674
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 675
SUMMARY FINANCIAL INFORMATION OF ANGELES PARTNERS VII
The summary financial information of Angeles Partners VII for the six
months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Angeles Partners VII for the years ended December 31, 1997, 1996
and 1995 is based on audited financial statements. This information should be
read in conjunction with such financial statements, including the notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein.
ANGELES PARTNERS VII
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------------- ---------------------------------------
1998 1997 1997 1996 1995
IN THOUSANDS, EXCEPT UNIT DATA ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues..................................... $ 636 $ 604 $ 1,230 $ 1,155 $ 1,058
Net Income (Loss).................................. 48 44 94 2 (86)
Net Income (Loss) per limited partnership unit..... 5.54 5.08 10.73 0.23 (9.81)
Distributions per limited partnership unit......... 15.11 -- -- -- 8.86
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------------- ---------------------------------------
1998 1997 1997 1996 1995
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation....... $ 1,698 $ 1,902 $ 1,809 $ 2,003 $ 2,160
Total Assets....................................... 2,171 2,310 2,323 2,344 2,438
Notes Payable...................................... 2,278 2,396 2,339 2,452 2,555
Partners' Capital/(Deficit)........................ (223) (189) (139) (233) (235)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING
PARTNERSHIP ANGELES PARTNERS VII
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $15.11 $0.00
</TABLE>
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THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $20.00 per unit to
$100.00 per unit from January 1, 1997 to September 30, 1998. As of December 31,
1997, your general partner estimated the net asset value of your units to be
$272.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
property may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's property, our
offer consideration could be less than the net proceeds that you would realize
upon a future liquidation of your partnership. Accordingly, although there can
be no assurance, you might receive more consideration if you do not tender your
units and, instead, continue to hold your units and ultimately receive proceeds
from a liquidation of your partnership. However, you may prefer to receive our
offer consideration now rather than wait for uncertain future net liquidation
proceeds. As of December 31, 1997, your general partner estimated the net asset
value of your units to be $272.00 per unit. Furthermore, your general partner
has no present intention to liquidate your partnership, and your partnership's
agreement of limited partnership does not require a sale of your partnership's
property by any particular date.
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
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CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a single property. In contrast,
the AIMCO Operating Partnership is in the business of acquiring, marketing,
managing and operating a large portfolio of apartment properties. While
diversification of assets may reduce
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certain risks of investment attributable to a single property or entity,
there can be no assurance as to the value or performance of our securities or
our portfolio of properties as compared to the value of your units or your
partnership. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the six months ended June 30, 1998
were $15.11 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as
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receiving a hypothetical distribution of cash resulting from a decrease in
your share of the liabilities of your partnership. Any such hypothetical
distribution of cash would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
property owned by your partnership. Through subsidiaries, AIMCO currently owns,
in the aggregate, approximately a 1.14% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
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Previous Tender Offers
We are aware that tender offers may have been made to acquire units in your
partnership in exchange for cash. We are unaware of the amounts offered, terms,
tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you
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were to sell your units in a private transaction. Any such sale would
likely be at a very substantial discount from your pro rata share of the fair
market value of your partnership's property. Continuation without our offer
would deny you and your partners the benefits of diversification into a company
which has a much larger and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, if you tender less than all of your units, you must continue to hold at
least five units following our acceptance of tendered units. You may tender
fractional units only if you are tendering all of your units. No alternative,
conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998, (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998, (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 508 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 5.86% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner filed a complaint in the Superior Court of the State of
California, County of Los Angeles against Insignia, the partnerships, the
general partners and additional entities affiliated with several of the
defendants. Plaintiffs allege that they have requested from, but have been
denied by each of the partnerships, lists of their respective limited partners
for the purpose of making tender offers to purchase up to 4.9% of the units of
limited partnership interest in each of the partnerships. The complaint also
alleges that certain of the defendants made tender offers to purchase units of
limited partnership interest in many of the partnerships, with the alleged
result that plaintiffs have been deprived of the benefits they would have
realized from ownership of the additional units. The plaintiffs assert eleven
causes of action, including breach of contract, unfair business practices, and
violations of the partnership statutes of the states in which the partnerships
are organized. Plaintiffs seeks compensatory, punitive and treble damages.
Plaintiffs estimate compensatory damages to exceed $15 million. An answer to the
complaint was filed by the defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated the property in light
of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
- -------------------- ---------------- -------------- --------------
<S> <C> <C> <C>
Cedarwood Apartments $ % $
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Distributions with respect to your units for the six months ended
June 30, 1998 were $15.11 (equivalent to $ on an annualized basis).
Therefore, distributions with respect to the Preferred OP Units and Common
OP Units that we are offering are expected to be , immediately
following our offer, than the distributions with respect to your units. See
"Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-50
<PAGE> 701
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $20.00 to $100.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 775 units (representing approximately 8.94%
of the total outstanding units) was transferred in sale transactions. Set forth
in the table below are the high and low sales prices of units for the quarterly
periods from January 1, 1996 to September 30, 1998, as reported by the general
partner. The transfer paperwork submitted to the general partner often does not
include the requested price information or contains conflicting information as
to the actual sales price. Accordingly, you should not rely upon this
information as being completely accurate.
ANGELES PARTNERS VII
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER
----------------------
LOW SALES HIGH SALES
PRICE PRICE
PER UNIT PER UNIT
--------- ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter............................................. $ 44.00 $100.00
Second Quarter............................................ 20.00 45.00
First Quarter............................................. 100.00 60.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................................ 100.00 100.00
Third Quarter............................................. 100.00 100.00
Second Quarter............................................ 65.00 100.00
First Quarter............................................. 78.50 78.50
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................................ 80.00 80.00
Third Quarter............................................. 85.90 85.90
Second Quarter............................................ 40.00 58.00
First Quarter............................................. 50.00 50.00
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
S-51
<PAGE> 702
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit. That
estimate of your partnership's net asset value per unit as of December 31, 1997
was $272. This estimated net asset value is based on a hypothetical sale of the
partnership's property and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the cash, proceeds from temporary investments, and
all other assets that are believed to have liquidation value, after provision in
full for all of the other known liabilities of your partnership. This net asset
value does not take into account (i) timing considerations or (ii) costs
associated with winding up the partnership. Therefore, the AIMCO Operating
Partnership believes that this estimate of net asset value per unit does not
necessarily represent either the fair market value of a unit or the amount a
limited partner reasonably could expect to receive if the partnership's property
were sold and the partnership was liquidated. For this reason, the AIMCO
Operating Partnership considered this net asset value estimate to be less
meaningful in determining the offer consideration than the analysis described
above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
S-52
<PAGE> 703
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's property provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's property for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's property for 1998, as prepared
by your partnership; (vi) reviewed information prepared by management relating
to any debt encumbering your partnership's property; (vii) reviewed information
regarding market rental rates and conditions for similar properties in the
general market area of your partnership's property and other information
relating to acquisition criteria for
S-53
<PAGE> 704
similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the property, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's property including any deferred maintenance, and other factors
influencing value of your partnership's property and your partnership. Stanger
also performed site inspections of your partnership's property, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's property.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's property during October and November 1998.
In the course of the site visit, the physical facilities of your partnership's
property were observed, current rental and occupancy information was obtained,
current local market conditions were reviewed, similar competing properties were
identified, and local property management personnel were interviewed concerning
your partnership's property and local market conditions. Stanger also reviewed
and relied upon information provided by your partnership and AIMCO, including,
but not limited to, financial schedules of historical and current rental rates,
occupancies, income, expenses, reserve requirements, cash flow and related
financial information; property descriptive information including unit mix; and
information relating to the condition of the property, including any deferred
maintenance, capital budgets, status of ongoing or newly planned property
additions, reconfigurations, improvements and other factors affecting the
physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's property,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's property (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
property.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
S-54
<PAGE> 705
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
S-55
<PAGE> 706
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-56
<PAGE> 707
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash Flow from Operations (as defined of the AIMCO Operating Partnership's agreement of
in your partnership's agreement of limited partner- limited partnership (the "AIMCO Operating Partnership
ship). The termination date of your partnership is Agreement") or as provided by law. See "Description of
December 31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee or The purpose of the AIMCO Operating Partnership is to
other equity interests in, or long-term leasehold conduct any business that may be lawfully conducted by
interests in, improved residential, commercial and a limited partnership organized pursuant to the
industrial real properties and to operate such Delaware Revised Uniform Limited Partnership Act (as
properties with the primary objectives of distributing amended from time to time, or any successor to such
among the partners tax-sheltered cash flow and statute) (the "Delaware Limited Partnership Act"),
providing capital growth. Subject to restrictions provided that such business is to be conducted in a
contained in your partnership's agreement of limited manner that permits AIMCO to be qualified as a REIT,
partnership, your partnership may perform all acts unless AIMCO ceases to qualify as a REIT. The AIMCO
necessary, advisable or convenient to the business of Operating Partnership is authorized to perform any and
your partnership including borrowing money and creating all acts for the furtherance of the purposes and
liens. business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 708
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 10,000 units for cash time to the limited partners and to other persons, and
to selected persons who fulfill the requirements set to admit such other persons as additional limited
forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. No action or consent by the OP Unitholders is required
in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. The general partner may entities in which it is or thereby becomes a
not purchase or lease any real property from your participant upon such terms and subject to such
partnership or sell or lease any real property to your conditions consistent with the AIMCO Operating Part-
partnership either directly or through an affiliate. nership Agreement and applicable law as the general
However, the general partner or an affiliate may partner, in its sole and absolute discretion, believes
purchase property in its own name and temporarily hold to be advisable. Except as expressly permitted by the
title thereto for the purpose of facilitating its AIMCO Operating Partnership Agreement, neither the
acquisition or financing by your partnership if (1) the general partner nor any of its affiliates may sell,
property is purchased by your partnership for a price transfer or convey any property to the AIMCO Operating
no greater than the cost of the property to the general Partnership, directly or indirectly, except pursuant to
partner or its affiliate, (2) no difference exists in transactions that are determined by the general partner
the interest rates of the loans secured by the property in good faith to be fair and reasonable.
at the time acquired by the general partner or its
affiliates and at the time acquired by your partnership
and (3) neither the general partner nor its affiliates
receive any economic advantage by reason of holding or
having held title to the property. Your partnership may
not make loans to the general partner or its affiliates
but the general partner may lend money to your partner-
ship if such loan is made at interest rates and charges
not in excess of the rates and charges which would be
charged by unrelated banks in a competitive position or
subject any assets of your partnership to a mortgage,
deed of trust or security interest as security for
repayment of a loan to your partnership by the general
partner or an affiliate except in the case of
"wraparound" notes. Unless certain conditions are met,
the general partner may not finance the purchase of
your partnership's property by use of a "wraparound" or
"all-inclusive" note and mortgage or deed of trust
under which the general partner or any of its
affiliates are the obligee or secured party. Your
partnership may not grant to the
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
general partner or its affiliates an exclusive right or
an exclusive employment to sell your partnership's
property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of assets, Partnership has credit agreements that restrict, among
subject any asset of your partnership to one or more other things, its ability to incur indebtedness. See
mortgages, deeds of trust or other security interest, "Risk Factors -- Risks of Significant Indebtedness" in
so that the aggregate amount of indebtedness secured by the accompanying Prospectus.
mortgages, deeds or trust and other security interests
to which all partnership assets are subject,
immediately after such action, is greater than 80% of
the aggregate amount of the purchase price of all
assets. The general partner may not mortgage or subject
to the encumbrance of a mortgage, deed of trust or
other security interest substantially all of the assets
of your partnership at one time or from time to time
without the approval of the limited partners holding a
majority of the then outstanding units. Your
partnership may not issue debt securities to the
public. The general partner may not cause your
partnership to incur obligations secured by its
property providing for lump sum principal or "balloon"
payments less than fifteen years from the date of
incurrence of the obligation. No creditor who makes a
non-recourse loan to your partnership will have or
acquire at any time, as a result of making such loan,
any direct or indirect interest in the profits, capital
or property of your partnership, other than as a
secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, the general partner has the management power over the business and affairs of the
right, power and authority, on behalf of your AIMCO Operating Partnership. The OP Unitholders have
partnership, and in its name, to exercise all of the the right to vote on certain matters described under
rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without limited partners under California Units -- Voting Rights" below. The general partner may
law. Limited partners have no right to participate in not be removed by the OP Unitholders with or without
the management or conduct of your partnership's cause.
business or affairs nor any power or authority to act
for or on behalf of your partnership in any respect In addition to the powers granted a general partner of
whatsoever. a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Oper-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ating Partnership. The AIMCO Operating Partnership may
incur debt or enter into other similar credit,
guarantee, financing or refinancing arrangements for
any purpose upon such terms as the general partner
determines to be appropriate, and may perform such
other acts and duties for and on behalf of the AIMCO
Operating Partnership as are provided in the AIMCO
Operating Partnership Agreement. The general partner is
authorized to execute, deliver and perform certain
agreements and transactions on behalf of the AIMCO
Operating Partnership without any further act, approval
or vote of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. No indemnification will be provided for settlements and other amounts incurred in connection
liabilities arising under the Securities Act of 1933. with any actions relating to the operations of the
AIMCO Operating Partnership, as set forth in the AIMCO
Operating Partnership Agreement. The Delaware Limited
Partnership Act provides that subject to the standards
and restrictions, if any, set forth in its partnership
agreement, a limited partnership may, and shall have
the power to, indemnify and hold harmless any partner
or other person from and against any and all claims and
demands whatsoever. It is the position of the
Securities and Exchange Commission that indemnification
of directors and officers for liabilities arising under
the Securities Act is against public policy and is
unenforceable pursuant to Section 14 of the Securities
Act of 1933.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner and the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership. No limited partner may controlling interest in the AIMCO Operating Partner-
substitute a transferee of his units in such limited ship. Additionally, the AIMCO Operating Partnership
partner's place without the consent of the general Agreement contains restrictions on the ability of OP
partner which may be withheld at the sole discretion of Unitholders to transfer their OP Units. See
the general partner. "Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited the general
</TABLE>
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<PAGE> 711
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partners if such amendment: (1) adds to the partner may, without the consent of the OP Unitholders,
representation, duties, or obligations of the general amend the AIMCO Operating Partnership Agreement,
partner or its affiliates or surrenders any right or amendments to the AIMCO Operating Partnership Agreement
power granted to the general partner or its affiliates require the consent of the holders of a majority of the
for the benefit of the limited partner, (2) cures any outstanding Common OP Units, excluding AIMCO and
ambiguity, corrects or supplements any provision which certain other limited exclusions (a "Majority in
may be inconsistent with any other provision or makes Interest"). Amendments to the AIMCO Operating
any other provision with respect to matters or Partnership Agreement may be proposed by the general
questions arising under your partnership's agreement of partner or by holders of a Majority in Interest.
limited partnership consistent with the provisions of Following such proposal, the general partner will
your partnership's agreement of limited partnership and submit any proposed amendment to the OP Unitholders.
(3) deletes or adds any provision required by any The general partner will seek the written consent of
applicable law. Your partnership's agreement of limited the OP Unitholders on the proposed amendment or will
partnership may not be amended to change your call a meeting to vote thereon. See "Description of OP
partnership to a general partnership, extend the term Units -- Amendment of the AIMCO Operating Partnership
of your partnership, change the liability of the Agreement" in the accompanying Prospectus.
general partner or the limited partners. All other
amendments to your partnership's agreement of limited
partnership must be approved by the limited partners
owning more than 50% of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership is entitled to The general partner does not receive compensation for
receive an annual management fee equal to 7 1/2% of the its services as general partner of the AIMCO Operating
Net Cash from Operations for each year payable Partnership. However, the general partner is entitled
quarterly for its services as general partner and also to payments, allocations and distributions in its
receives reimbursement for expenses incurred in such capacity as general partner of the AIMCO Operating
capacity. Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for the negligence, no OP Unitholder has personal liability for
debts, liabilities, or obligations of your partnership the AIMCO Operating Partnership's debts and
in excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
business of your partnership as may be necessary to general partner from taking any action or engaging in
properly conduct the affairs of your partnership. The any transaction as to which it has a conflict of
general partner has a fiduciary responsibility for the interest. The AIMCO Operating Partnership Agreement
safekeeping and use of all of your partnership's funds expressly authorizes the general partner to enter into,
and assets, whether or not they are in its immediate on behalf of the AIMCO Operating Partnership, a right
possession or control. The general partner may not of first opportunity arrangement and other conflict
employ or permit others to employ such funds or assets avoidance agreements with various affiliates of the
in any manner except for the benefit of your AIMCO Operating Partnership and the general partner, on
partnership nor commingle funds of your partnership such terms as the general partner, in its sole and
with any other person. The general partner and its absolute discretion, believes are advisable. The AIMCO
affiliates may acquire real properties for their own Operating Partnership Agreement expressly limits the
account, or engage in the acquisition, development, liability of the general partner by providing that the
operation or management of real estate on behalf of general partner, and its officers and directors will
other entities, including business ventures similar to, not be liable or accountable in damages to the AIMCO
related to or in direct or indirect competition with Operating Partnership, the limited partners or
any business of your partnership. Neither your assignees for errors in judgment or mistakes of fact or
partnership nor any other partner will have any right law or of any act or omission if the general partner or
in or to such other business ventures or the income or such director or officer acted in good faith. See
profits derived therefrom. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
S-62
<PAGE> 713
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner; ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership; and holders of at least 50% of the
approve or disapprove the outstanding Preferred OP Units will Under the AIMCO Operating Partner-
mortgaging of all of the assets of be necessary for effecting any ship Agreement, the general partner
your partnership at one time or amendment of any of the provisions has the power to effect the
from time to time. of the Partnership Unit Desig- acquisition, sale, transfer,
nation of the Preferred OP Units exchange or other disposition of
The general partner may cause the that materially and adversely any assets of the AIMCO Operating
dissolution of your partnership by affects the rights or preferences Partnership (including, but not
retiring. In such event, your of the holders of the Preferred OP limited to, the exercise or grant
partnership may be continued if, Units. The creation or issuance of of any conversion, option,
within ninety days of the retire- any class or series of partnership privilege or subscription right or
ment, the limited partners holding units, including, without any other right available in
more than 50% of the units elect a limitation, any partnership units connection with any assets at any
substitute general partner who is that may have rights senior or time held by the AIMCO Operating
willing to continue your superior to the Preferred OP Units, Partnership) or the merger,
partnership. shall not be deemed to materially consolidation, reorganization or
adversely affect the rights or other combination of the AIMCO
preferences of the holders of Operating Partnership with or into
Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in
</TABLE>
S-63
<PAGE> 714
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
their sole and absolute discretion,
to continue the business of the
AIMCO Operating Partnership and to
the appointment of a successor
general partner. The general
partner may elect to dissolve the
AIMCO Operating Partnership in its
sole and absolute discretion, with
or without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior
</TABLE>
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<PAGE> 715
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fractional unit and on any securities exchange. The transferability of the OP Units.
if such assignment is less than all Preferred OP Units are subject to Until the expiration of one year
of the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
five units, (2) the assignee and OP Unitholder may not transfer all
the assignor execute, acknowledge Pursuant to the AIMCO Operating or any portion of its OP Units to
and deliver to the general partner Partnership Agreement, until the any transferee without the consent
a written assignment, (3) the expiration of one year from the of the general partner, which
transfer, when added to all other date on which a holder of Preferred consent may be withheld in its sole
assignment taking place in the OP Units acquired Preferred OP and absolute discretion. After the
preceding 12 months, in the opinion Units, subject to certain expiration of one year, such OP
of counsel to your partnership, exceptions, such holder of Unitholder has the right to
does not result in termination of Preferred OP Units may not transfer transfer all or any portion of its
your partnership for Federal tax all or any portion of its Pre- OP Units to any person, subject to
purposes and the transferor ferred OP Units to any transferee the satisfaction of certain
receives a ruling from the IRS to without the consent of the general conditions specified in the AIMCO
such effect and (4) the assignor partner, which consent may be Operating Partnership Agreement,
and assignee have complied with withheld in its sole and absolute including the general partner's
such other conditions as determined discretion. After the expiration of right of first refusal. See
by the general partner to comply one year, such holders of Preferred "Description of OP Units --
with any state securities OP Units has the right to transfer Transfers and Withdrawals" in the
regulatory authority. Such all or any portion of its Preferred accompanying Prospectus.
transferee may be substituted as a OP Units to any person, subject to
limited partner if: (1) the general the satisfaction of certain After the first anniversary of
partner consents in writing, which conditions specified in the AIMCO becoming a holder of Common OP
consent may be granted or denied in Operating Partnership Agreement, Units, an OP Unitholder has the
the sole discretion of the general including the general partner's right, subject to the terms and
partner, (2) the transferor elects right of first refusal. conditions of the AIMCO Operating
to become a substitute limited Partnership Agreement, to require
partner by delivering to the After a one-year holding period, a the AIMCO Operating Partnership to
general partner a written notice, holder may redeem Preferred OP redeem all or a portion of the
executed and acknowledge by the Units and receive in exchange Common OP Units held by such party
assignor and assignee of such therefor, at the AIMCO Operating in exchange for a cash amount based
election, (3) the assignee executes Partnership's option, (i) subject on the value of shares of Class A
and acknowledges such other to the terms of any Senior Units, Common Stock. See "Description of
instruments that the general cash in an amount equal to the OP Units -- Redemption Rights" in
partner may require including an Liquidation Preference of the the accompanying Prospectus. Upon
adoption of your partnership's Preferred OP Units tendered for receipt of a notice of redemption,
agreement of limited partnership, redemption, (ii) a number of shares the AIMCO Operating Partnership
and (4) the assignee pays the of Class I Cumulative Preferred may, in its sole and absolute
partnership for its expenses Stock of AIMCO that pay an discretion but subject to the
incurred in the transaction. aggregate amount of dividends yield restrictions on the ownership of
equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 717
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 718
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
S-73
<PAGE> 724
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to
7 1/2% of the Net Cash from Operations for each year payable quarterly for its
services as general partner and may also receive reimbursement for expenses
incurred in such capacity. The general partner of your partnership received fees
and reimbursements totaling $67,000 in 1996, $50,000 in 1997 and $46,000 for the
first six months of 1998. The property manager received management fees of
$57,000 in 1996, $60,000 in 1997 and $31,000 for the first six months of 1998.
The AIMCO Operating Partnership has no current intention of changing the fee
structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-74
<PAGE> 725
YOUR PARTNERSHIP
GENERAL
Angeles Partners VII was organized on January 1, 1977, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of one residential apartment complex:
Cedarwood Apartments, a 226-unit complex in Gretna, Louisiana. The general
partner of your partnership is Angeles Realty Corporation, which is a
majority-owned subsidiary of AIMCO. Insignia Residential Group, which is a
majority-owned subsidiary of AIMCO, serves as manager of the property owned by
your partnership. As of September 18, 1998 there were 8,669 units of limited
partnership interest issued and outstanding, which were held of record by 873
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10KSB for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
Pursuant to a prospectus date September 19, 1997, your general partner
(which was not then an affiliate of ours) indicated that favorable opportunities
for refinancing, sale or other disposition will be available for most properties
within less than four years of acquisition. Under your partnership's agreement
of limited partnership, the term of the partnership will continue until December
31, 2035, unless sooner terminated as provided in the agreement or by law.
Limited partners could, as an alternative to tendering their units, take a
variety of possible actions, including voting to liquidate the partnership or
amending the agreement of limited partnership to authorize limited partners to
cause the partnership to merge with another entity or engage in a "roll-up" or
similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each
S-75
<PAGE> 726
asset's operating performance and continuously evaluates the physical
improvement requirements. In addition, the financing structure for each
property, tax implications and the investment climate are all considered. Any of
these factors, and possibly others, could potentially contribute to any decision
by the general partner to sell, refinance, upgrade with capital improvements or
hold a particular partnership property. Based on the above considerations, the
general partner has determined that it is not in the best interests of limited
partners to sell or refinance any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. No indemnification will be provided for liabilities arising under the
Securities Act of 1933.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $1,001.00.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 8.86
January 1, 1996 - December 31, 1996......................... 0.00
January 1, 1997 - December 31, 1997......................... 0.00
January 1, 1998 - June 30, 1998............................. 15.11
</TABLE>
S-76
<PAGE> 727
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 1.14% interest in your partnership, including 12 units held by us and the
interest held by Angeles Realty Corporation, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $37,967
1995........................................................ 60,714
1996........................................................ 67,000
1997........................................................ 50,000
1998 (through June 30)...................................... 46,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $48,641
1995........................................................ 52,360
1996........................................................ 57,000
1997........................................................ 60,000
1998 (through June 30)...................................... 31,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
S-77
<PAGE> 728
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT Merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The financial statements of Angeles Partners VII appearing in Angeles
Partners VII Annual Report (Form 10-KSB) for the year ended December 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
S-78
<PAGE> 729
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 730
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 731
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 732
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 733
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 734
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 735
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 736
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 737
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 738
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES PARTNERS VIII
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of December 31, 1997, your general
partner estimated the net asset value of your units to be $0.00 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in two apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 739
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-15
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-17
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Partners VIII.............................. S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-32
Terms of the Offer; Expiration Date.......... S-32
Acceptance for Payment and Payment for
Units...................................... S-32
Procedure for Tendering Units................ S-33
Withdrawal Rights............................ S-36
Extension of Tender Period; Termination;
Amendment.................................. S-36
Proration.................................... S-37
Fractional OP Units.......................... S-37
Future Plans of the AIMCO Operating
Partnership................................ S-37
Voting by the AIMCO Operating Partnership.... S-38
Dissenters' Rights........................... S-38
Conditions of the Offer...................... S-38
Effects of the Offer......................... S-40
Certain Legal Matters........................ S-41
Fees and Expenses............................ S-43
Accounting Treatment......................... S-43
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-44
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-44
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-44
Tax Consequences of Exchanging Units Solely
for Cash................................... S-45
Adjusted Tax Basis........................... S-45
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-46
Passive Activity Losses...................... S-46
Foreign Offerees............................. S-47
VALUATION OF UNITS............................. S-47
FAIRNESS OF THE OFFER.......................... S-48
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-48
Fairness to Unitholders who Tender their
Units...................................... S-49
Fairness to Unitholders who do not Tender
their Units................................ S-50
Comparison of Consideration to Alternative
Consideration.............................. S-50
Allocation of Consideration.................. S-52
STANGER ANALYSIS............................... S-53
Experience of Stanger........................ S-53
Summary of Materials Considered.............. S-53
Summary of Reviews........................... S-54
Conclusions.................................. S-55
Assumptions, Limitations and
Qualifications............................. S-55
Compensation and Material Relationships...... S-56
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-57
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-63
DESCRIPTION OF PREFERRED OP UNITS.............. S-67
General...................................... S-67
Ranking...................................... S-67
Distributions................................ S-67
Allocation................................... S-68
Liquidation Preference....................... S-68
Redemption................................... S-69
Voting Rights................................ S-69
Restrictions on Transfer..................... S-69
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-70
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-72
CONFLICTS OF INTEREST.......................... S-75
Conflicts of Interest with Respect to the
Offer...................................... S-75
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-75
Competition Among Properties................. S-75
Features Discouraging Potential Takeovers.... S-75
Future Exchange Offers....................... S-75
YOUR PARTNERSHIP............................... S-76
General...................................... S-76
</TABLE>
i
<PAGE> 740
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-76
Originally Anticipated Term of the
Partnership................................ S-76
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-76
Property Management.......................... S-77
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-77
Distributions................................ S-77
Beneficial Ownership of Interests in Your
Partnership................................ S-77
Compensation Paid to the General Partner and
its Affiliates............................. S-78
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-78
LEGAL MATTERS.................................. S-79
EXPERTS........................................ S-79
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 741
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Partners VIII. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty
Corporation, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 742
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 743
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid no distributions for the six months ended June 30,
1998. We will pay fixed quarterly distributions of $ per unit
on the Tax-Deferral % Preferred OP Units before any distributions are
paid to holders of Tax-Deferral Common OP Units. We pay quarterly
distributions on the Tax-Deferral Common OP Units based on our funds from
operations for that quarter. For the six months ended June 30, 1998, we
paid distributions of $1.125 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). This is equivalent to
distributions of $ per year on the number of Tax-Deferral %
Preferred OP Units, or $ per year on the number of Tax-Deferral Common
OP Units, that you would receive in an exchange for each of your
partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in two properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 744
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $1.00 per unit to $8.00 per unit
from January 1, 1997 to September 30, 1998. As of December 31, 1997, your
general partner estimated the net asset value of your units to be $0.00 per
unit. However, we do not believe that these valuations represent the
current fair market value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 745
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of five
units (except for units held by IRAs and Keogh Plans). You may tender
fractional units only if you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 746
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 747
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 748
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of December
31, 1997, your general partner estimated the net asset value of your units to be
$0.00 per unit. However, we do not believe that this valuation represents the
current fair market value of your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $1.00 per unit to $8.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
S-8
<PAGE> 749
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages two
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the
S-9
<PAGE> 750
holders of OP Units. Such securities could have priority over the OP Units as to
cash flow, distributions and liquidation proceeds. The effect of any such
issuance may be to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our
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investors unless certain financial tests or other criteria are satisfied. In
some cases, our subsidiaries are subject to similar provisions, which may
restrict their ability to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
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POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
1.204% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your partnership
to sell its assets, distribute the net liquidation proceeds to its partners
in accordance with your partnership's agreement of limited partnership, and
then dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes,
at their option. If your partnership were to sell its assets and liquidate,
you and your partners would not need to rely upon capitalization of income
or other valuation methods to estimate the fair market value of your
partnership's assets. Instead, such assets would be valued through
negotiations with prospective purchasers. However, a liquidating sale of
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
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Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership has incurred recurring operating losses, is in default on
certain indebtedness and does not generate sufficient cash flows to meet
current operating requirements. These conditions raise substantial doubt
about your partnership's ability to continue as a going concern. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
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- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
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Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
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THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
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FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $1.00 to $8.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO
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Operating Partnership cannot remove the general partner. Also, your
partnership is limited as to the number of limited partner interests it may
issue while the AIMCO Operating Partnership has no such limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership is entitled to
receive an annual management fee equal to 7 1/2% of the Net Cash from Operations
for each year payable quarterly for its services as general partner and may also
receive reimbursement for expenses incurred in such capacity. The general
partner of your partnership received fees and reimbursements totaling $54,000
for the first six months of 1998. The property manager received management fees
of $98,000 for the first six months of 1998. We have no current intention of
changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Partners VIII was organized on August 10, 1978, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following two residential
apartment complexes: Bercado Shores, a 234-unit complex in Mishawka, Indiana;
and Brittany Point, a 431-unit complex in Huntsville, Alabama. The general
partner of your partnership is Angeles Realty Corporation, which is a
majority-owned subsidiary of AIMCO. Insignia Residential Group, which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
your
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partnership. As of September 15, 1998, there were 11,759 units of limited
partnership interest issued and outstanding, which were held of record by 1,318
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
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SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995 and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 761
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 762
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 763
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 764
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 765
SUMMARY FINANCIAL INFORMATION OF ANGELES PARTNERS VIII
The summary financial information of Angeles Partners VIII for the six
months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Angeles Partners VIII for the years ended December 31, 1997,
1996 and 1995 is based on audited financial statements. This information should
be read in conjunction with such financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference herein.
ANGELES PARTNERS VIII
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $ 1,951 $ 1,894 $ 3,883 $ 3,643 $ 4,542
Net Income (Loss)........................................... (369) (400) (631) (1,023) 15
Net Income (Loss) per limited partnership unit.............. (30.81) (33.10) (52.72) (84.52) 1.23
Distributions per limited partnership unit.................. -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $ 4,642 $ 4,969 $ 4,831 $ 5,192 $ 4,902
Total Assets................................................ 5,426 5,674 5,476 5,779 5,651
Notes Payable............................................... 16,811 16,713 16,578 16,808 16,425
Partners' Capital (Deficit)................................. (14,571) (13,971) (14,202) (13,571) (12,548)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING
PARTNERSHIP ANGELES PARTNERS VIII
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $0.00
</TABLE>
S-25
<PAGE> 766
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $1.00 per unit to
$8.00 per unit from January 1, 1997 to September 30, 1998. As of December 31,
1997, your general partner estimated the net asset value of your units to be
$0.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. Furthermore, your general partner has no present intention
to liquidate your partnership, and your partnership's agreement of limited
partnership does not require a sale of your partnership's properties by any
particular date.
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
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CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages two properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce
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certain risks of investment attributable to a single property or entity,
there can be no assurance as to the value or performance of our securities or
our portfolio of properties as compared to the value of your units or your
partnership. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the six months ended June 30, 1998
were $0.00 per unit. No distributions were made by your partnership from January
1, 1994 through the present. Therefore, distributions with respect to the
Preferred OP Units and Common OP Units that we are offering are expected to be
, immediately following our offer, than the distributions with respect to
your units. See "Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as
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receiving a hypothetical distribution of cash resulting from a decrease in
your share of the liabilities of your partnership. Any such hypothetical
distribution of cash would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Residential Group,
which manages the properties owned by your partnership. Through subsidiaries,
AIMCO currently owns, in the aggregate, approximately a 1.204% interest in your
partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
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Previous Tender Offers
We are aware that tender offers may have been made to acquire units in your
partnership in exchange for cash. We are unaware of the amounts offered, terms,
tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you
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were to sell your units in a private transaction. Any such sale would
likely be at a very substantial discount from your pro rata share of the fair
market value of your partnership's property. Continuation without our offer
would deny you and your partners the benefits of diversification into a company
which has a much larger and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of five units (except for units held by IRAs and Keogh Plans).
You may tender fractional units only if you are tendering all of your units. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 55 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 0.47% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner filed a complaint in the Superior Court of the State of
California, County of Los Angeles against Insignia, the partnerships, the
general partners and additional entities affiliated with several of the
defendants. Plaintiffs allege that they have requested from, but have been
denied by each of the partnerships, lists of their respective limited partners
for the purpose of making tender offers to purchase up to 4.9% of the units of
limited partnership interest in each of the partnerships. The complaint also
alleges that certain of the defendants made tender offers to purchase units of
limited partnership interest in many of the partnerships, with the alleged
result that plaintiffs have been deprived of the benefits they would have
realized from ownership of the additional units. The plaintiffs assert eleven
causes of action, including breach of contract, unfair business practices, and
violations of the partnership statutes of the states in which the partnerships
are organized. Plaintiffs seeks compensatory, punitive and treble damages.
Plaintiffs estimate compensatory damages to exceed $15 million. An answer to the
complaint was filed by the defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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<PAGE> 784
CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Bercado Shores $ % $
Brittany Point
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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<PAGE> 789
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Distributions with respect to your units for the six months ended
June 30, 1998 were $0.00. Therefore, distributions with respect to the
Preferred OP Units and Common OP Units that we are offering are expected to
be , immediately following our offer, than the distributions with
respect to your units. See "Comparison of Ownership of Your Units and AIMCO
OP Units -- Distributions." No distributions were made by your partnership
from January 1, 1994 through the present.
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating
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<PAGE> 790
Partnership and are not the result of arms-length negotiations. See
"Conflicts of Interest." The general partner of your partnership and the AIMCO
Operating Partnership believe that the valuation method described in "Valuation
of Units" provides a meaningful indication of value for residential apartment
properties although there are other ways to value real estate. A liquidation in
the future might generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
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<PAGE> 791
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $1.00 to $8.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 163 units (representing less than 1.39% of
the total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to September 30, 1998, as reported by the
general partner. The transfer paperwork submitted to the general partner often
does not include the requested price information or contains conflicting
information as to the actual sales price. Accordingly, you should not rely upon
this information as being completely accurate.
ANGELES PARTNERS VIII
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER(a)
----------------------
LOW SALES HIGH SALES
PRICE PRICE
PER UNIT PER UNIT
--------- ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter............................................. $ 1.00 $ 1.00
Second Quarter............................................ -- --
First Quarter............................................. -- --
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................................ -- --
Third Quarter............................................. -- --
Second Quarter............................................ -- --
First Quarter............................................. 8.00 8.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................................ -- --
Third Quarter............................................. 5.05 5.05
Second Quarter............................................ 1.00 30.00
First Quarter............................................. 10.00 10.00
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
S-51
<PAGE> 792
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit. That
estimate of your partnership's net asset value per unit as of December 31, 1997
was $0.00. This estimated net asset value is based on a hypothetical sale of the
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the cash, proceeds from temporary investments, and
all other assets that are believed to have liquidation value, after provision in
full for all of the other known liabilities of your partnership. This net asset
value does not take into account (i) timing considerations or (ii) costs
associated with winding up the partnership. Therefore, the AIMCO Operating
Partnership believes that this estimate of net asset value per unit does not
necessarily represent either the fair market value of a unit or the amount a
limited partner reasonably could expect to receive if the partnership's
properties were sold and the partnership was liquidated. For this reason, the
AIMCO Operating Partnership considered this net asset value estimate to be less
meaningful in determining the offer consideration than the analysis described
above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
S-52
<PAGE> 793
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
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<PAGE> 794
similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
S-54
<PAGE> 795
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
S-55
<PAGE> 796
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-56
<PAGE> 797
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
21, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee or The purpose of the AIMCO Operating Partnership is to
other equity interests in, or long-term leasehold conduct any business that may be lawfully conducted by
interests in, improved residential, commercial and a limited partnership organized pursuant to the
industrial real properties and to operate such Delaware Revised Uniform Limited Partnership Act (as
properties with the primary objectives of distributing amended from time to time, or any successor to such
among the partners tax-sheltered cash flow and statute) (the "Delaware Limited Partnership Act"),
providing capital growth. Subject to restrictions provided that such business is to be conducted in a
contained in your partnership's agreement of limited manner that permits AIMCO to be qualified as a REIT,
partnership, your partnership may perform all acts unless AIMCO ceases to qualify as a REIT. The AIMCO
necessary, advisable or convenient to the business of Operating Partnership is authorized to perform any and
your partnership including borrowing money and creating all acts for the furtherance of the purposes and
liens. business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 798
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 12,000 units for cash time to the limited partners and to other persons, and
to selected persons who fulfill the requirements set to admit such other persons as additional limited
forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. No action or consent by the OP Unitholders is required
in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. The general partner may entities in which it is or thereby becomes a
not purchase or lease any real property or acquire any participant upon such terms and subject to such
loan or lease from your partnership or sell or lease conditions consistent with the AIMCO Operating Part-
any real property, loan or lease to your partnership nership Agreement and applicable law as the general
either directly or through an affiliate. However, the partner, in its sole and absolute discretion, believes
general partner or an affiliate may purchase property to be advisable. Except as expressly permitted by the
in its own name and temporarily hold title thereto for AIMCO Operating Partnership Agreement, neither the
the purpose of facilitating its acquisition or general partner nor any of its affiliates may sell,
financing by your partnership if (1) the property is transfer or convey any property to the AIMCO Operating
purchased by your partnership for a price no greater Partnership, directly or indirectly, except pursuant to
than the cost of the property to the general partner or transactions that are determined by the general partner
its affiliate, (2) no difference exists in the interest in good faith to be fair and reasonable.
rates of the loans secured by the property at the time
acquired by the general partner or its affiliates and
at the time acquired by your partnership and (3)
neither the general partner nor its affiliates receive
any economic advantage by reason of holding or having
held title to the property. Your partnership may not
make loans to the general partner or its affiliates but
the general partner may lend money to your partnership
if such loan is made at interest rates and charges not
in excess of the rates and charges which would be
charged by unrelated banks in a competitive position or
subject any assets of your partnership to a mortgage,
deed of trust or security interest as security for
repayment of a loan to your partnership by the general
partner or an affiliate except in the case of
"wraparound" notes. Unless certain conditions are met,
the general partner may not finance the purchase of
your partnership's property by use of a "wraparound" or
"all-inclusive" note and mortgage or deed of trust
under which the general partner or any of its
affiliates are the obligee or secured party. Your
partnership may not grant to the general
</TABLE>
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<PAGE> 799
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partner or its affiliates an exclusive right or an
exclusive employment to sell your partnership's
property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of assets, Partnership has credit agreements that restrict, among
subject any asset of your partnership to one or more other things, its ability to incur indebtedness. See
mortgages, deeds of trust or other security interest, "Risk Factors -- Risks of Significant Indebtedness" in
so that the aggregate amount of indebtedness secured by the accompanying Prospectus.
mortgages, deeds of trust and other security interests
to which all partnership assets are subject,
immediately after such action, is greater than 80% of
the aggregate amount of the purchase price of all
assets. The general partner may not mortgage or subject
to the encumbrance of a mortgage, deed of try or other
security interest substantially all of the assets of
your partnership at one time or from time to time
without the approval of the limited partners holding a
majority of the then outstanding units. Your
partnership may not issue debt securities to the
public. The general partner must use its best efforts
to obtain level payment financing on the most favorable
terms available to your partnership. In connection with
the purchase of property by your partnership, the
general partner must use its best efforts, subject to
market conditions, to ensure that any first mortgage
financing incurred in connection with such purchase
which contains a provision for a balloon payment pro-
vides that, (1) such balloon payment will not be due
and payable prior to fifteen years from the later of
the inception date of the loan or the acquisition date
of the property and (2) periodic payments are in
amounts which would be sufficient to self-liquidate the
loan over a period of twenty to thirty years. Secon-
dary financing which is more than 10% of the purchase
price of the property which incurred in connection with
a purchase, if any, will be fully amortizing or if not
fully amortizing will not be due and payable during the
expected holding period of the property. No creditor
who makes a non-recourse loan to your partnership will
have or acquire at any time, as a result of making such
loan, any direct or indirect interest in the profits,
capital or property of your partnership, other than as
a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, the general partner has the management power over the business and affairs of the
right, power and authority, on behalf of your AIMCO Operating Partnership. The OP Unitholders have
partnership, and in its name, to exercise all of the the right to vote on certain matters de-
rights, powers and authority of a
</TABLE>
S-59
<PAGE> 800
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partner of a partnership without limited partners under scribed under "Comparison of Ownership of Your Units
California law. Limited partners have no right to and AIMCO OP Units -- Voting Rights" below. The general
participate in the management or conduct of your partner may not be removed by the OP Unitholders with
partnership's business or affairs nor any power or or without cause.
authority to act for or on behalf of your partnership
in any respect whatsoever. In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. No indemnification will be provided for settlements and other amounts incurred in connection
liabilities arising under the Securities Act of 1933. with any actions relating to the operations of the
AIMCO Operating Partnership, as set forth in the AIMCO
Operating Partnership Agreement. The Delaware Limited
Partnership Act provides that subject to the standards
and restrictions, if any, set forth in its partnership
agreement, a limited partnership may, and shall have
the power to, indemnify and hold harmless any partner
or other person from and against any and all claims and
demands whatsoever. It is the position of the
Securities and Exchange Commission that indemnification
of directors and officers for liabilities arising under
the Securities Act is against public policy and is
unenforceable pursuant to Section 14 of the Securities
Act of 1933.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner under a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute becoming
</TABLE>
S-60
<PAGE> 801
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
general partner and the substitute general partner a substituted limited partner pursuant to the AIMCO
executes and acknowledges such instruments as the Operating Partnership Agreement. The general partner
general partner deems necessary or advisable, including may exercise this right of approval to deter, delay or
the adoption of your partnership's agreement of limited hamper attempts by persons to acquire a controlling
partnership. No limited partner may substitute a interest in the AIMCO Operating Partnership.
transferee of his units in such limited partner's place Additionally, the AIMCO Operating Partnership Agree-
without the consent of the general partner which may be ment contains restrictions on the ability of OP
withheld at the sole discretion of the general partner. Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership and (3) deletes or adds any provision the OP Unitholders. The general partner will seek the
required by any applicable law. Your partnership's written consent of the OP Unitholders on the proposed
agreement of limited partnership may not be amended to amendment or will call a meeting to vote thereon. See
change your partnership to a general partnership, "Description of OP Units -- Amendment of the AIMCO
extend the term of your partnership, change the Operating Partnership Agreement" in the accompanying
liability of the general partner or the limited Prospectus.
partners. All other amendments to your partnership's
agreement of limited partnership must be approved by
the limited partners owning more than 50% of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership is entitled to The general partner does not receive compensation for
receive an annual management fee equal to 7 1/2% of the its services as general partner of the AIMCO Operating
Net Cash from Operations for each year payable Partnership. However, the general partner is entitled
quarterly for its services as general partner and may to payments, allocations and distributions in its
also receive reimbursement for expenses incurred in capacity as general partner of the AIMCO Operating
such capacity. Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
S-61
<PAGE> 802
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not for the debts, negligence, no OP Unitholder has personal liability for
liabilities, or obligations of your partnership in the AIMCO Operating Partnership's debts and
excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner and its affiliates may acquire real properties Operating Partnership Agreement expressly limits the
for their own account, or engage in the acquisition, liability of the general partner by providing that the
development, operation or management of real estate on general partner, and its officers and directors will
behalf of other entities, including business ventures not be liable or accountable in damages to the AIMCO
similar to, related to or in direct or indirect Operating Partnership, the limited partners or
competition with any business of your partnership. assignees for errors in judgment or mistakes of fact or
Neither your partnership nor any other partner will law or of any act or omission if the general partner or
have any right in or to such other business ventures or such director or officer acted in good faith. See
the income or profits derived therefrom. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and
</TABLE>
S-62
<PAGE> 803
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
loss from the AIMCO Operating Partnership can only be
offset against other income and loss from the AIMCO
Operating Partnership). Income of the AIMCO Operating
Partnership, however, attributable to dividends from
the Management Subsidiaries (as defined below) or
interest paid by the Management Subsidiaries does not
qualify as passive activity income and cannot be offset
against losses from "passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner, ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of Partnership Agree- Part-
</TABLE>
S-63
<PAGE> 804
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
single transaction of substantially ment, the affirmative vote or nership or the admission of a
all of the assets of your consent of holders of at least 50% successor general partner.
partnership and approve or of the outstanding Preferred OP
disapprove the mortgaging of all of Units will be necessary for Under the AIMCO Operating Partner-
the assets of your partnership at effecting any amendment of any of ship Agreement, the general partner
one time or from time to time. the provisions of the Partnership has the power to effect the
Unit Designation of the Preferred acquisition, sale, transfer,
The general partner may cause the OP Units that materially and exchange or other disposition of
dissolution of your partnership by adversely affects the rights or any assets of the AIMCO Operating
retiring. In such event, your preferences of the holders of the Partnership (including, but not
partnership may be continued if, Preferred OP Units. The creation or limited to, the exercise or grant
within ninety days of the retire- issuance of any class or series of of any conversion, option,
ment, the limited partners holding partnership units, including, privilege or subscription right or
more than 50% of the units elect a without limitation, any partner- any other right available in
substitute general partner who is ship units that may have rights connection with any assets at any
willing to continue your senior or superior to the Preferred time held by the AIMCO Operating
partnership. OP Units, shall not be deemed to Partnership) or the merger,
materially adversely affect the consolidation, reorganization or
rights or preferences of the other combination of the AIMCO
holders of Preferred OP Units. With Operating Partnership with or into
respect to the exercise of the another entity, all without the
above described voting rights, each consent of the OP Unitholders.
Preferred OP Units shall have one
(1) vote per Preferred OP Unit. The general partner may cause the
dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
Holders of any other Pre-
</TABLE>
S-64
<PAGE> 805
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
lative Preferred Stock. Such ferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fractional unit and on any securities exchange. The transferability of the OP Units.
if such assignment is less than all Preferred OP Units are subject to Until the expiration of one year
of the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
five units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignments taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any person, subject to
your partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor re- without the consent of the general conditions specified in the AIMCO
ceives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have complied with discretion. After the expiration of right of first refusal. See
such other conditions as determined one year, such holders of Preferred "Description of OP Units --
by the general partner to comply OP Units has the right to transfer Transfers and Withdrawals" in the
with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to any person, subject to
transferee may be substi- the satisfaction of
</TABLE>
S-65
<PAGE> 806
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
tuted as a limited partner if: (1) certain conditions specified in the After the first anniversary of
the general partner consents in AIMCO Operating Partnership Agree- becoming a holder of Common OP
writing, which consent may be ment, including the general Units, an OP Unitholder has the
granted or denied in the sole partner's right of first refusal. right, subject to the terms and
discretion of the general partner, conditions of the AIMCO Operating
(2) the transferor elects to become After a one-year holding period, a Partnership Agreement, to require
a substitute limited partner by holder may redeem Preferred OP the AIMCO Operating Partnership to
delivering to the general partner a Units and receive in exchange redeem all or a portion of the
written notice, executed and therefor, at the AIMCO Operating Common OP Units held by such party
acknowledged by the assignor and Partnership's option, (i) subject in exchange for a cash amount based
assignee of such election, (3) the to the terms of any Senior Units, on the value of shares of Class A
assignee executes and acknowledges cash in an amount equal to the Common Stock. See "Description of
such other instruments that the Liquidation Preference of the OP Units -- Redemption Rights" in
general partner may require Preferred OP Units tendered for the accompanying Prospectus. Upon
including an adoption of your redemption, (ii) a number of shares receipt of a notice of redemption,
partnership's agreement of limited of Class I Cumulative Preferred the AIMCO Operating Partnership
partnership, and (4) the assignee Stock of AIMCO that pay an may, in its sole and absolute
pays the partnership for its aggregate amount of dividends yield discretion but subject to the
expenses incurred in the equivalent to the distributions on restrictions on the ownership of
transaction. the Preferred OP Units tendered for Class A Common Stock imposed under
redemption and are part of a class AIMCO's charter and the transfer
or series of preferred stock that restrictions and other limitations
is then listed on the New York thereof, elect to cause AIMCO to
Stock Exchange or another national acquire some or all of the tendered
securities exchange, or (iii) a Common OP Units in exchange for
number of shares of Class A Common Class A Common Stock, based on an
Stock of AIMCO that is equal in exchange ratio of one share of
Value to the Liquidation Preference Class A Common Stock for each Com-
of the Preferred OP Units tendered mon OP Unit, subject to adjustment
for redemption. The Preferred OP as provided in the AIMCO Operating
Units may not be redeemed at the Partnership Agreement.
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
S-66
<PAGE> 807
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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<PAGE> 815
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to
7 1/2% of the Net Cash from Operations for each year payable quarterly for its
services as a general partner and may also receive reimbursement for expenses
incurred in such capacity. The general partner of your partnership did not
receive a management fee in 1998, however it did receive reimbursements totaling
$150,000 in 1996, $120,000 in 1997, and $54,000 for the first six months of
1998. The property manager received management fees of $181,000 in 1996,
$194,000 in 1997 and $98,000 for the first six months of 1998. The AIMCO
Operating Partnership has no current intention of changing the fee structure for
the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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<PAGE> 816
YOUR PARTNERSHIP
GENERAL
Angeles Partners VIII was organized on August 10, 1978, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following two residential
apartment complexes: Bercado Shores, a 234-unit complex in Mishawka, Indiana;
and Brittany Point, a 431-unit complex in Huntsville, Alabama. The general
partner of your partnership is Angeles Realty Corporation, which is a
majority-owned subsidiary of AIMCO. Insignia Residential Group, which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
your partnership. As of September 15, 1998, there were 11,759 units of limited
partnership interest issued and outstanding, which were held of record by 1,318
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated December 21, 1979, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that it was not
expected that refinancing, sale or other disposition of a property could occur
within four terms of acquisition. Under your partnership's agreement of limited
partnership, the term of the partnership will continue until December 31, 2035,
unless sooner terminated as provided in the agreement or by law. Limited
partners could, as an alternative to tendering their units, take a variety of
possible actions, including voting to liquidate the partnership or amending the
agreement of limited partnership to authorize limited partners to cause the
partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each
S-76
<PAGE> 817
asset's operating performance and continuously evaluates the physical
improvement requirements. In addition, the financing structure for each
property, tax implications and the investment climate are all considered. Any of
these factors, and possibly others, could potentially contribute to any decision
by the general partner to sell, refinance, upgrade with capital improvements or
hold a particular partnership property. Based on the above considerations, the
general partner has determined that it is not in the best interests of limited
partners to sell or refinance any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is now a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest."
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. No indemnification will be provided for liabilities arising under the
Securities Act of 1933.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
DISTRIBUTIONS
Your partnership has not paid distributions since January 1, 1995. The
original cost per unit was $1,000.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 1.204% interest in your partnership, including 24 units held by us and the
interest held by Angeles Realty Corporation, as general partner of your
partnership. In addition to the tender offers described under "Background and
Reasons for the Offer -- Previous Tender Offers." Except as set forth above,
neither the AIMCO Operating Partnership, nor, to the best of its knowledge, any
of its affiliates, (i) beneficially own or have a right to acquire any units,
(ii) have effected any transactions in the units in the past 60 days, or (iii)
have any contract, arrangement, understanding or relationship with any other
person with respect to any securities of your partnership, including, but not
limited to, contracts, arrangements, understandings or relationships concerning
transfer or
S-77
<PAGE> 818
voting thereof, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $ 47,051
1995........................................................ 63,795
1996........................................................ 150,000
1997........................................................ 120,000
1998 (through June 30)...................................... 54,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $181,961
1995........................................................ 181,922
1996........................................................ 181,000
1997........................................................ 194,000
1998 (through June 30)...................................... 98,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative
S-78
<PAGE> 819
0.25% and positive 0.5% in the case of base rate loans, depending upon a
ratio of the AIMCO Operating Partnership's consolidated unsecured indebtedness
to the value of certain unencumbered assets. The credit facility matures on
October 1, 1999 unless extended, at the discretion of the lenders. The credit
facility provides for the conversion of the revolving facility into a three year
term loan. The availability of funds to the AIMCO Operating Partnership under
the credit facility is subject to certain borrowing base restrictions and other
customary restrictions, including compliance with financial and other covenants
thereunder. The financial covenants require the AIMCO Operating Partnership to
maintain a ratio of debt to gross asset value of no more than 0.55 to 1.0, an
interest coverage ratio of 2.25 to 1.0 and a fixed charge coverage ratio of at
least 1.6 to 1.0 through December 31, 1998, 1.7 to 1.0 from January 1, 1999
through June 30, 1999, and 1.8 to 1.0 thereafter. In addition, the credit
facility limits the AIMCO Operating Partnership from distributing more than 80%
of its Funds From Operations (as defined) to holders of OP Units, imposes
minimum net worth requirements and provides other financial covenants related to
certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Partners VIII appearing in
Angeles Partners VIII Annual Report (Form 10-KSB) for the year ended December
31, 1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
S-79
<PAGE> 820
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 821
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 822
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 823
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 824
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 825
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 826
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 827
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 828
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 829
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES PARTNERS IX
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF THE
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF
OFFER AND TO RENDER AN OPINION AS TO THE YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND THE
PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $544.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $535.41 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 830
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO
OP Units................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Partners IX................................ S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-65
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
</TABLE>
i
<PAGE> 831
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-79
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-82
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 832
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Partners IX. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty
Corporation, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 833
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 834
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership has not paid distributions since 1985. We will pay fixed
quarterly distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of
Tax-Deferral Common OP Units. We pay quarterly distributions on the
Tax-Deferral Common OP Units based on our funds from operations for that
quarter. For the six months ended June 30, 1998, we paid distributions of
$1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25 on
an annual basis). This is equivalent to distributions of $ per year
on the number of Tax-Deferral % Preferred OP Units, or $ per year on
the number of Tax-Deferral Common OP Units, that you would receive in an
exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
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<PAGE> 835
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $52.50 per unit to $440.00 per unit
for the period from January 1, 1997 to September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to
be $544.00 per unit and an affiliate of your general partner estimated the
net liquidation value of your units to be $535.41 per unit. However, we do
not believe that these valuations represent the current fair market value
of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 836
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that, unless you are tendering
all of your units, you retain a minimum of 5 units (except for units held
by IRAs and Keogh Plans). You may tender fractional units only if you are
tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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<PAGE> 837
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 838
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 839
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$544.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $535.41 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $52.50 per unit to $440.00 per
unit for the quarterly periods from July 1, 1996 to June 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
S-8
<PAGE> 840
deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
S-9
<PAGE> 841
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
S-10
<PAGE> 842
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately an
18.14% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in significant amounts of
taxable income to you and your partners. Another option for liquidation of
your
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investment would be to sell your units in a private transaction. Any such
sale could be at a very substantial discount from your pro rata share of
the fair market value of your partnership's property and might involve
significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
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In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $52.50 to $440.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership is entitled to
receive an annual management fee equal to 5% of the Net Cash from Operations per
year for its services as general partner and may also receive reimbursement for
expenses incurred in such capacity. Your partnership reimbursed the general
partner $107,000 for expenses for the first six months of 1998. The property
manager received management fees of $189,000 for the first six months of 1998.
We have no current intention of changing the fee structure for your property
manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Partners IX was organized on September 14, 1979, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following
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five residential apartment complexes: The Pines of Northwest Crossing
Apartments, a 412-unit complex in Houston, Texas; Panorama Terrace Apartments, a
227-unit complex in Birmingham, Alabama; Forest River Apartments, a 248-unit
complex in Gadsden, Alabama; Village Green Apartments, a 337-unit complex in
Montgomery, Alabama; and Rosemont Crossing, a 217-unit complex in San Antonio,
Texas. The general partner of your partnership is Angeles Realty Corporation,
which is a majority-owned subsidiary of AIMCO. A majority-owned subsidiary of
AIMCO serves as manager of the properties owned by your partnership. As of
September 15, 1998, there were 19,975 units of limited partnership interest
issued and outstanding, which were held of record by 1,474 limited partners.
Your partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone number at
that address is (303) 757-8101. For additional information about your
partnership, please refer to the annual and quarterly reports prepared by your
partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
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SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 852
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 853
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 854
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 855
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 856
SUMMARY FINANCIAL INFORMATION OF ANGELES PARTNERS IX
The summary financial information of Angeles Partners IX for the six months
ended June 30, 1998 and 1997 is unaudited. The summary financial information for
Angeles Partners IX for the years ended December 31, 1997, 1996, and 1995 is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein.
ANGELES PARTNERS IX
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------- -------------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $ 3,782 $ 3,706 $ 7,512 $ 7,462 $ 7,167
Net Income (Loss)........................................... (472) (331) (971) (912) (707)
Net Income (Loss) per limited partnership unit.............. (23.38) (16.42) (48.11) (45.20) (35.07)
Distributions per limited partnership unit.................. -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- -------------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $13,607 $14,584 $14,141 $15,158 $15,813
Total Assets................................................ 15,779 17,081 16,487 17,700 17,774
Notes Payable............................................... 19,658 19,874 19,768 19,974 19,165
Partners' Capital (Deficit)................................. (4,623) (3,511) (4,151) (3,180) (2,268)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING
PARTNERSHIP ANGELES PARTNERS IX
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0 $0
</TABLE>
S-25
<PAGE> 857
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $52.50 per unit to
$440.00 per unit for the period from January 1, 1997 to September 30, 1998. As
of June 30, 1998, your general partner estimated the net asset value of your
units to be $544.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $535.41 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 858
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
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RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a [few properties]. In contrast,
the AIMCO Operating Partnership is in the business of acquiring, marketing,
managing and operating a large portfolio of apartment properties. While
diversification of assets may reduce certain risks of investment attributable to
a single property or entity, there can be no assurance as to the value or
performance of our securities or our portfolio of properties as compared to the
value of your units or your partnership. Proceeds of future asset sales or
refinancings by the AIMCO Operating Partnership generally will be reinvested
rather than distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ , current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Your
partnership has not paid distributions since 1985. Therefore, distributions with
respect to the Preferred OP Units and Common OP Units that we are offering are
expected to be , immediately following our offer, than the distributions
with respect to your units. See "Comparison of Ownership of Your Units and AIMCO
OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
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deemed cash distribution. Although your general partner has no current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
properties owned by your partnership. Through subsidiaries, AIMCO currently
owns, in the aggregate, approximately a 18.14% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its
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ownership interest in certain Insignia Partnerships which would provide a
larger asset and capital base and increased diversification. As of October ,
1998, the AIMCO Operating Partnership has made offers to of the
Insignia Partnerships, including your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In April 1998, Broad River Properties,
L.L.C., then an affiliate of Insignia and now our affiliate, commenced a tender
offer pursuant to which it acquired 2,528 units (representing approximately 13%
of the number outstanding) at a cash purchase price of $325.00 per unit on
August , 1998.
Additionally, on July 27, 1998, Madison Partnership Liquidity Investors 64,
LLC ("Madison") which was unaffiliated with Insignia and is not affiliated with
AIMCO, commenced a tender offer for $150.00 per unit and purchased shares
in , 1998.
Following the tender offer by Madison, in August, 1998, Cooper River,
L.L.C., then an affiliate of Insignia and now our affiliate commenced a tender
offer for a maximum of 5,000 units (representing approximately 25% of the number
outstanding) at a cash purchase price of $330.00 per unit. Pursuant to this
tender offer, Cooper River, L.L.C. purchased units on , 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in those tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
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Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
retain a minimum of 5 units (except for units held by IRAs and Keogh Plans). You
may retain less than 5 units only if you are tendering all of your units. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal income tax purposes. This provision may limit sales of units in the
secondary market and in private transactions for the twelve-month period
following completion of this offer. The general partner of your partnership has
advised the AIMCO Operating Partnership that it will not process any requests
for recognition of substitution of limited partners upon a transfer of units
during such twelve-month period which the general partner believes may cause a
tax termination in contravention of the agreement of limited partnership. The
AIMCO Operating Partnership took this restriction into account in determining
the maximum number of units for which this offer is made. Based on the general
partner's records, approximately 1,252 units in your partnership have been
transferred during the twelve months ended December 31, 1997 (representing
approximately 6.27% of the outstanding units). As a result, the AIMCO Operating
Partnership does not believe that this restriction will preclude it from
acquiring the maximum number of units for which this offer is made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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<PAGE> 875
filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We \multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
- -------- ---------------- -------------- --------------
<S> <C> <C> <C>
The Pines of Northwest Crossing
Apartments........................... $ % $
Panorama Terrace Apartments............
Forest River Apartments................
Village Green Apartments...............
Rosemont Crossing......................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other
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<PAGE> 880
costs including required capital expenditures and deferred maintenance to derive
a net equity value for your partnership of $ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Your partnership has not paid distributions since 1985. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
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<PAGE> 883
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $52.50 to $440
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from July 1, 1996 to June
30, 1998 an aggregate of 2,102 units (representing less than 10.6% of the total
outstanding units) was transferred (excluding units transferred by Insignia to
IPLP in February 1998 and in tender offers) in sale transactions. Set forth in
the table below are the high and low sales prices of units for the period from
to June 30, 1998, as reported by the general partner and by The
Partnership Spectrum, which is an independent, third-party source. The gross
sales prices reported by The Partnership Spectrum do not necessarily reflect the
net sales proceeds received by sellers of units, which typically are reduced by
commissions and other secondary market transaction costs to amounts less than
the reported prices; thus the AIMCO Operating Partnership does not know whether
the information compiled by The Partnership Spectrum is accurate or complete.
The transfer paperwork submitted to the general partner often does not include
the requested price information or contains conflicting information as to the
actual sales price. Accordingly, you should not rely upon this information as
being completely accurate.
ANGELES PARTNERS IX
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $150.00 $328.10 $ -- $ --
Second Quarter.................................. 150.00 329.60 310.00 342.00
First Quarter................................... 105.00 440.00(c) 289.00 330.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 105.00 330.00 235.00 301.00
Third Quarter................................... 65.10 348.77 265.00 349.00
Second Quarter.................................. 105.00 316.00 250.00 325.00
First Quarter................................... 52.50 329.00 311.00 317.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 240.20 335.00 230.00 310.00
Third Quarter................................... 2.00 279.00 260.00 330.00
Second Quarter.................................. 110.00 276.00 -- --
First Quarter................................... 200.00 249.00 -- --
Fiscal Year Ended December 31, 1995:
Fourth Quarter.................................. 74.50 249.00 -- --
Third Quarter................................... 100.00 195.00 -- --
Second Quarter.................................. 70.00 135.00 -- --
First Quarter................................... 71.00 299.00 -- --
</TABLE>
S-52
<PAGE> 884
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) The general partner has information that indicates this reported sales
price represented a single, isolated transaction for a minimal number of
units and such sales price was materially higher than the range of sales
prices for all other transactions during the quarter. The purchase price is
approximately 4% less than the highest reported sales price of $342 per
unit for other transactions during the six-month period prior to June 30,
1998.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
S-53
<PAGE> 885
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Village Green Apartments was appraised in March 1996 by an
independent, third party appraiser, Koepper Tenet Real Estate Services, Inc.
(the "Appraiser"), in connection with a refinancing of the property. According
to the appraisal report, the scope of the appraisal included an inspection of
the property and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the Appraisal Standards
set forth in the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (known as "FIRREA"). The estimated market value of the fee simple estate of
the property specified in that appraisal report was $8,100,000. A copy of the
summary of the appraisal has been filed as an exhibit to the AIMCO Operating
Partnership's Tender Offer Statement on Schedule 14D-1 filed with the SEC.
Independent appraisals have not been conducted for any of the partnership's
other properties in the past three years.
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in August 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $544.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $476.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
S-54
<PAGE> 886
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
S-55
<PAGE> 887
similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
S-56
<PAGE> 888
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
S-57
<PAGE> 889
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-58
<PAGE> 890
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee or The purpose of the AIMCO Operating Partnership is to
other equity interests in, or long-term leasehold conduct any business that may be lawfully conducted by
interests in, improved residential, commercial and a limited partnership organized pursuant to the
industrial real properties (other than manufactured Delaware Revised Uniform Limited Partnership Act (as
home park communities) and to operate such properties amended from time to time, or any successor to such
with the primary objectives of endeavoring to preserve statute) (the "Delaware Limited Partnership Act"),
the purchasing power of capital invest and offset the provided that such business is to be conducted in a
impact of inflation, providing capital growth and manner that permits AIMCO to be qualified as a REIT,
distributing among the partners tax-sheltered cash unless AIMCO ceases to qualify as a REIT. The AIMCO
flow. Subject to restrictions contained in your Operating Partnership is authorized to perform any and
partnership's agreement of limited partnership, your all acts for the furtherance of the purposes and
partnership may perform all acts necessary, advisable business of the AIMCO Operating Partnership, provided
or convenient to the business of your partnership that the AIMCO Operating Partnership may not take, or
including borrowing money and creating liens. refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 891
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner may make offerings of units upon such contributions as may be established by the general
terms and condition and in such amounts as the general partner in its sole discretion. The net capital
partner in its sole discretion deems reasonable, so contribution need not be equal for all OP Unitholders.
long as such terms and conditions are no more favorable No action or consent by the OP Unitholders is required
than those offer to the limited partners who purchased in connection with the admission of any additional OP
their units under the terms and conditions of the first Unitholder. See "Description of OP Units -- Management
offering. The capital contribution need not be equal by the AIMCO GP" in the accompanying Prospectus.
for all limited partners and no action or consent is Subject to Delaware law, any additional partnership
required in connection with the admission of any interests may be issued in one or more classes, or one
additional limited partners. Your partnership may not or more series of any of such classes, with such
issue units in exchange for property. designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. The general partner may entities in which it is or thereby becomes a
not purchase or lease any real property from your participant upon such terms and subject to such
partnership nor sell or lease any real property to your conditions consistent with the AIMCO Operating Part-
partnership either directly or through an affiliate. nership Agreement and applicable law as the general
However, the general partner or an affiliate may partner, in its sole and absolute discretion, believes
purchase property in its own name and temporarily hold to be advisable. Except as expressly permitted by the
title thereto for the purpose of facilitating its AIMCO Operating Partnership Agreement, neither the
acquisition or financing by your partnership if (1) the general partner nor any of its affiliates may sell,
property is purchased by your partnership for a price transfer or convey any property to the AIMCO Operating
no greater than the cost of the property to the general Partnership, directly or indirectly, except pursuant to
partner or its affiliate, (2) no difference exists in transactions that are determined by the general partner
the interest rates of the loans secured by the property in good faith to be fair and reasonable.
at the time acquired by the general partner or its
affiliates and at the time acquired by your partnership
and (3) neither the general partner nor its affiliates
receive any economic advantage by reason of holding or
having held title to the property. Your partnership may
not make loans to the general partner or its affiliates
but the general partner may lend money to your
partnership if such loan is made at interest rates and
finance charges not in excess of the rates and finance
charges which would be charged by unrelated banks in a
competitive position or in any event in excess of the
prime interest rate which is charged from time to time
by Citibank N.A., New York, New York on ninety-day
unsecured loans to responsible and substantial
borrowers. The general partner may not subject any
asset of your partnership to a mortgage, deed of trust
or security interest as security for repayment of a
loan to your partnership by the general partner or any
affiliate, except in certain circumstances. Unless
certain conditions are met, the general partner may not
make a permanent loan to your partnership nor may your
partnership finance the purchase
</TABLE>
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<TABLE>
<S> <C>
of your partnership's property by use of a "wraparound"
or "all-inclusive" note and mortgage or deed of trust
under which the general partner or any of its
affiliates are the obligee or secured party. Your
partnership may not grant to the general partner or its
affiliates an exclusive right or an exclusive
employment to sell your partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of assets, Partnership has credit agreements that restrict, among
subject any asset of your partnership to one or more other things, its ability to incur indebtedness. See
mortgages, deeds of trust or other security interest, "Risk Factors -- Risks of Significant Indebtedness" in
so that the aggregate amount of indebtedness secured by the accompanying Prospectus.
mortgages, deeds or trust and other security interests
to which all partnership assets are subject,
immediately after such action, is greater than 80% of
the aggregate amount of the purchase price of all
assets. Your partnership may not issue debt securities
to the public. The general partner must use its best
efforts to obtain level payment financing on the most
favorable terms available to your partnership. In
connection with the purchase of property by your
partnership, the general partner must use its best
efforts, subject to market conditions, to ensure that
any first mortgage financing incurred in connection
with such purchase which contains a provision for a
balloon payment provides that, (1) such balloon payment
will not be due and payable prior to fifteen years from
the later of the inception date of the loan or the
acquisition date of the property and (2) periodic
payments are in amounts which would be sufficient to
completely repay the loan over a period of twenty to
thirty years. Secondary financing which is more than
10% of the purchase price of the property which
incurred in connection with a purchase, if any, will be
fully amortizing or if not fully amortizing will not be
due and payable during the expected holding period of
the property. No creditor who makes a non-recourse loan
to your partnership will have or acquire at any time,
as a result of making such loan, any direct or indirect
interest in the profits, capital or property of your
partnership, other than as a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, the general partner has the management power over the business and affairs of the
right, power and authority, on behalf of your AIMCO Operating Partnership. The OP Unitholders have
partnership, and in its name, to exercise all of the the right to vote on certain matters de-
rights, powers and authority of a
</TABLE>
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<TABLE>
<S> <C>
partner of a partnership without limited partners under scribed under "Comparison of Ownership of Your Units
California law. Limited partners have no right to and AIMCO OP Units -- Voting Rights" below. The general
participate in the management or conduct of your partner may not be removed by the OP Unitholders with
partnership's business or affairs nor any power or or without cause.
authority to act for or on behalf of your partnership
in any respect whatsoever. In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. In the event that a claim for indemnification settlements and other amounts incurred in connection
against liabilities arising under the Securities Act of with any actions relating to the operations of the
1933, as amended (other than for the payment by your AIMCO Operating Partnership, as set forth in the AIMCO
partnership of expenses incurred or paid by the general Operating Partnership Agreement. The Delaware Limited
partner in the successful defense of any action, suit Partnership Act provides that subject to the standards
or proceeding) is asserted by the general partner in and restrictions, if any, set forth in its partnership
connection with the units, your partnership will, agreement, a limited partnership may, and shall have
unless in the opinion of its counsel the matter is the power to, indemnify and hold harmless any partner
settled by controlling precedent, submit to a court of or other person from and against any and all claims and
appropriate jurisdiction the question of whether such demands whatsoever. It is the position of the
indemnification by it is against public policy as Securities and Exchange Commission that indemnification
expressed in the Securities Act of 1933, as amended and of directors and officers for liabilities arising under
has agreed to be governed by the court's final the Securities Act is against public policy and is
adjudication of such issue. unenforceable pursuant to Section 14 of the Securities
Act of 1933.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute becoming
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
general partner and the substitute general partner a substituted limited partner pursuant to the AIMCO
executes and acknowledges such instruments as the Operating Partnership Agreement. The general partner
general partner deems necessary or advisable, including may exercise this right of approval to deter, delay or
the adoption of your partnership's agreement of limited hamper attempts by persons to acquire a controlling
partnership. No limited partner may substitute a interest in the AIMCO Operating Partnership.
transferee of his units in such limited partner's place Additionally, the AIMCO Operating Partnership Agree-
without the consent of the general partner which may be ment contains restrictions on the ability of OP
withheld at the sole discretion of the general partner. Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership and (3) deletes or adds any provision the OP Unitholders. The general partner will seek the
required by any applicable law. Your partnership's written consent of the OP Unitholders on the proposed
agreement of limited partnership may not be amended to amendment or will call a meeting to vote thereon. See
change your partnership to a general partnership, "Description of OP Units -- Amendment of the AIMCO
extend the term of your partnership, change the Operating Partnership Agreement" in the accompanying
liability of the general partner or the limited Prospectus.
partners. All other amendments to your partnership's
agreement of limited partnership must be approved by
the limited partners owning more than 50% of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
Your general partner is entitled to receive an annual The general partner does not receive compensation for
management fee equal to 5% of the Net Cash from its services as general partner of the AIMCO Operating
Operations per year for its services as general partner Partnership. However, the general partner is entitled
and may also receive reimbursement for expenses to payments, allocations and distributions in its
incurred in such capacity. capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not for the debts, negligence, no OP Unitholder has personal liability for
liabilities, or obligations of your partnership in the AIMCO Operating Partnership's debts and
excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participa-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
tion in the "control" of the AIMCO Operating
Partnership's business, then a holder of OP Units could
be held liable under certain circumstances for the
AIMCO Operating Partnership's obligations to the same
extent as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner and its affiliates may acquire real properties Operating Partnership Agreement expressly limits the
for their own account, or engage in the acquisition, liability of the general partner by providing that the
development, operation or management of real estate on general partner, and its officers and directors will
behalf of other entities, including business ventures not be liable or accountable in damages to the AIMCO
similar to, related to or in direct or indirect Operating Partnership, the limited partners or
competition with any business of your partnership. assignees for errors in judgment or mistakes of fact or
Neither your partnership nor any other partner will law or of any act or omission if the general partner or
have any right in or to such other business ventures or such director or officer acted in good faith. See
the income or profits derived therefrom. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner and ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership. holders of at least 50% of the
outstanding Preferred OP Units will Under the AIMCO Operating Partner-
The general partner may cause the be necessary for effecting any ship Agreement, the general partner
dissolution of your partnership by amendment of any of the provisions has the power to effect the
retiring. In such event, your of the Partnership Unit Desig- acquisition, sale, transfer,
partnership may be continued if, nation of the Preferred OP Units exchange or other disposition of
within ninety days of the retire- that materially and adversely any assets of the AIMCO Operating
ment, the limited partners holding affects the rights or preferences Partnership (including, but not
more than 50% of the units elect a of the holders of the Preferred OP limited to, the exercise or grant
substitute general partner who is Units. The creation or issuance of of any conversion, option,
willing to continue your any class or series of partnership privilege or subscription right or
partnership. units, including, without any other right available in
limitation, any partnership units connection with any assets at any
that may have rights senior or time held by the AIMCO Operating
superior to the Preferred OP Units, Partnership) or the merger,
shall not be deemed to materially consolidation, reorganization or
adversely affect the rights or other combination of the AIMCO
preferences of the holders of Operating Partnership with or into
Preferred OP Units. With respect to another en-
the exercise of the above de-
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
scribed voting rights, each tity, all without the consent of
Preferred OP Units shall have one the OP Unitholders.
(1) vote per Preferred OP Unit.
The general partner may cause the
dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations (as defined in your provided, however, that at any time portion as the general partner may
partnership's agreement of limited and from time to time on or after in its sole and absolute discretion
partnership) remaining after the fifth anniversary of the issue determine, of Available Cash (as
compensation is paid to the general date of the Preferred OP Units, the defined in the AIMCO Operating
partner for its services are to be AIMCO Operating Partnership may Partnership Agreement) generated by
made quarterly to the partners in adjust the annual distribution rate the AIMCO Operating Partnership
proportion to the interests in your on the Preferred OP Units to the during such quarter to the general
partnership. The distributions lower of (i) % plus the annual partner, the special limited
payable to the partners are not interest rate then applicable to partner and the holders of Common
fixed in amount and depend upon the U.S. Treasury notes with a maturity OP Units on the record date
operating results and net sales or of five years, and (ii) the annual established by the general partner
refinancing proceeds available from dividend rate on the most recently with respect to such quarter, in
the disposition of your issued AIMCO non-convertible accordance with their respective
partnership's assets. preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on The general partner in its sole and
the Preferred OP Units that may be absolute discretion may distribute
in arrears. to the OP Unitholders Available
Cash on a more frequent basis and
When distributions are not paid in provide for an appropriate record
full upon the Preferred OP Units or date.
any Parity Units, all distributions
declared upon the
</TABLE>
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<PAGE> 898
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Preferred OP Units and any Parity The AIMCO Operating Partnership
Units shall be declared ratably in Agreement requires the general
proportion to the respective partner to take such reasonable
amounts of distributions efforts, as determined by it in its
accumulated, accrued and unpaid on sole and absolute discretion and
the Preferred OP Units and such consistent with AIMCO's
Parity Units. Unless full qualification as a REIT, to cause
cumulative distributions on the the AIMCO Operating Partnership to
Preferred OP Units have been de- distribute sufficient amounts to
clared and paid, except in limited enable the general partner to
circumstances, no distributions may transfer funds to AIMCO and enable
be declared or paid or set apart AIMCO to pay stockholder dividends
for payment by the AIMCO Operating that will (i) satisfy the
Partnership and no other requirements for qualifying as a
distribution of cash or other prop- REIT under the Code and the
erty may be declared or made, Treasury Regulations and (ii) avoid
directly or indirectly, by the any Federal income or excise tax
AIMCO Operating Partnership with liability of AIMCO. See
respect to any Junior Units, nor "Description of OP
shall any Junior Units be re- Units -- Distributions" in the
deemed, purchased or otherwise accompanying Prospectus.
acquired for consideration, nor
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fraction unit and if on any securities exchange. The transferability of the OP Units.
such assignment is less than all of Preferred OP Units are subject to Until the expiration of one year
the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
five units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignment taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any person, subject to
your partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor without the consent of the general conditions specified in the AIMCO
receives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have complied with discretion. After the expiration of right of first refusal. See
such other conditions as deter- one year, such holders of Preferred "Description of OP Units --
mined by the general partner to OP Units has the right to transfer Transfers and Withdrawals" in the
comply with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to any person, subject to
transferee may be substituted as a the satisfaction of certain After the first anniversary of
limited partner if: (1) the general conditions specified in the AIMCO becoming a holder of Common OP
partner consents in writing, which Operating Partnership Agreement, Units, an OP Unitholder has the
consent may be granted or denied in including the general partner's right, subject to the terms and
the sole discretion of the general right of first refusal. conditions of the AIMCO Operating
partner, (2) the transferor elects Partnership Agreement, to require
to become a substitute limited After a one-year holding period, a the AIMCO Operating Partnership to
partner by delivering to the holder may redeem Preferred OP redeem all or a portion of the
general partner a written notice, Units and receive in exchange Common OP Units held by such party
executed and acknowledged by the therefor, at the AIMCO Operating in exchange for a cash amount based
assignor and assignee of such Partnership's option, (i) subject on the value of shares of Class A
election, (3) the assignee executes to the terms of any Senior Units, Common Stock. See "Description of
and acknowledges such other cash in an amount equal to the OP Units -- Redemption Rights" in
instruments that the general Liquidation Preference of the the accompanying Prospectus.
partner may require including an Preferred
adoption of your partnership's
agreement of limited part-
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
nership, and (4) the assignee pays OP Units tendered for redemption, Upon receipt of a notice of
the partnership for its expenses (ii) a number of shares of Class I redemption, the AIMCO Operating
incurred in the transaction. Cumulative Preferred Stock of AIMCO Partnership may, in its sole and
that pay an aggregate amount of absolute discretion but subject to
dividends yield equivalent to the the restrictions on the ownership
distributions on the Preferred OP of Class A Common Stock imposed
Units tendered for redemption and under AIMCO's charter and the
are part of a class or series of transfer restrictions and other
preferred stock that is then listed limitations thereof, elect to cause
on the New York Stock Exchange or AIMCO to acquire some or all of the
another national securities tendered Common OP Units in
exchange, or (iii) a number of exchange for Class A Common Stock,
shares of Class A Common Stock of based on an exchange ratio of one
AIMCO that is equal in Value to the share of Class A Common Stock for
Liquidation Preference of the each Common OP Unit, subject to
Preferred OP Units tendered for adjustment as provided in the AIMCO
redemption. The Preferred OP Units Operating Partnership Agreement.
may not be redeemed at the option
of the AIMCO Operating Partnership.
See "Description of Preferred OP
Units -- Redemption."
</TABLE>
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<PAGE> 900
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 901
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 902
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 903
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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<PAGE> 904
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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<PAGE> 905
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
S-75
<PAGE> 907
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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<PAGE> 908
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to 5%
of the Net Cash from Operations per year for its services as general partner and
may also receive reimbursement for expenses incurred in such capacity. The
general partner of your partnership received fees and reimbursements totaling
$232,000 in 1996, $208,000 in 1997 and $107,000 for the first six months of
1998. The property manager received management fees of $372,000 in 1996,
$373,000 in 1997 and $189,000 for the first six months of 1998. The AIMCO
Operating Partnership has no current intention of changing the fee structure for
the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-77
<PAGE> 909
YOUR PARTNERSHIP
GENERAL
Angeles Partners IX was organized on September 14, 1979, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following five residential
apartment complexes: The Pines of Northwest Crossing Apartments, a 412-unit
complex in Houston, Texas; Panorama Terrace Apartments, a 227-unit complex in
Birmingham, Alabama; Forest River Apartments, a 248-unit complex in Gadsden,
Alabama; Village Green Apartments, a 337-unit complex in Montgomery, Alabama;
and Rosemont Crossing, a 217-unit complex in San Antonio, Texas. The general
partner of your partnership is Angeles Realty Corporation, which is a
majority-owned subsidiary of AIMCO. The property manager who is a majority-owned
subsidiary of AIMCO, serves as manager of the properties owned by your
partnership. As of September 15, 1998, there were 19,975 units of limited
partnership interest issued and outstanding, which were held of record by 1,474
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated December 21, 1979, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner had, on average,
begun selling their properties during the fifth year after the investments were
made and had sold all of their properties after eight years of ownership. The
prospectus further stated, however, that the general partner was unable to
predict how long the partnership would remain invested in the properties and
that the partnership acquired such properties for investment rather than resale.
In any event, according to the prospectus, the general partner anticipated that
a disposition of the properties would depend on, among other things, the current
real estate and money markets, economic climate and income tax consequences to
the limited partners. Under your partnership's agreement of limited partnership,
the term of the partnership will continue until December 31, 2035, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
S-78
<PAGE> 910
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest."
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In the event that a claim for indemnification against liabilities
arising under the Securities Act of 1933, as amended (other than for the payment
by your partnership of expenses incurred or paid by the general partner in the
successful defense of any action, suit or proceeding) is asserted by the general
partner in connection with the units, your partnership will, unless in the
opinion of its counsel the matter is settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act of 1933, as
amended and has agreed to be governed by the court's final adjudication of such
issue.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
S-79
<PAGE> 911
DISTRIBUTIONS
Your partnership has not paid any distributions since 1985. The original
cost per unit was $1,000.00.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
an 18% interest in your partnership, including 3,476 units indirectly held by us
and the interest held by Angeles Realty Corporation, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $ 89,998
1995........................................................ 143,223
1996........................................................ 232,000
1997........................................................ 208,000
1998 (through June 30)...................................... 107,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- --------
<S> <C>
1994........................................................ $344,222
1995........................................................ 356,418
1996........................................................ 372,000
1997........................................................ 373,000
1998 (through June 30)...................................... 189,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-80
<PAGE> 912
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-81
<PAGE> 913
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Partners IX appearing in
Angeles Partners IX Annual Report (Form 10-KSB) for the year ended December 31,
1997, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
S-82
<PAGE> 914
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 915
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 916
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 917
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership and the directors of AIMCO, are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 918
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 919
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 920
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 921
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 922
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 923
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES PARTNERS X
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF THE
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF
OFFER AND TO RENDER AN OPINION AS TO THE YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND THE
PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $245.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $242.96 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 924
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-18
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-19
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Partners X................................. S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-56
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-65
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
</TABLE>
i
<PAGE> 925
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-79
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-82
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 926
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Partners X. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty
Corporation, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 927
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 928
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership has not paid any distributions since 1985. We will pay
fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 929
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $1.00 per unit to $62.00 per unit
from January 1, 1997 through September 30, 1998. As of June 30, 1998, your
general partner estimated the net asset value of your units to be $245 per
unit and an affiliate of your general partner estimated the net liquidation
value of your units to be $242.96 per unit. However, we do not believe that
these valuations represent the current fair market value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 930
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of five
units (except for units held by IRAs and Keogh Plans). You may tender
fractional units only if you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 931
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 932
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 933
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$245 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $242.96 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $1.00 per unit to $62.00 per
unit from January 1, 1997 through September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
S-8
<PAGE> 934
deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence
S-9
<PAGE> 935
on matters affecting the operation of the AIMCO Operating Partnership and third
parties may find it difficult to attempt to gain control or influence the
activities of our operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although
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these agreements provide us with some protection against rising interest rates,
these agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
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POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
1.22% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such
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assets would be valued through negotiations with prospective purchasers.
However, a liquidating sale of your partnership's property would be a
taxable event for you and your partners and could result in significant
amounts of taxable income to you and your partners. Another option for
liquidation of your investment would be to sell your units in a private
transaction. Any such sale could be at a very substantial discount from
your pro rata share of the fair market value of your partnership's property
and might involve significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
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- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
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Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We
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estimate that our total costs and expenses in making the offer (excluding
the purchase price of the units payable to you and your partners) will be
approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
</TABLE>
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<TABLE>
<S> <C>
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $1.00 to $62.00
Estimated liquidation proceeds............................ $
</TABLE>
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STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner. Also, your partnership is limited as to the number of limited partner
interests it may issue while the AIMCO Operating Partnership has no such
limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership is entitled to
receive an annual management fee equal to 5% of the Net Cash from Operations for
each year for its services as general partner of your partnership so long as the
limited partners receive 5% per annum on their capital investment and may also
receive reimbursement for expenses incurred in such capacity. The general
partner of your partnership received fees and reimbursements of $50,000 for the
six months ended June 30, 1998. The property manager received management fees of
$83,000 for the first six months of 1998. We have no current intention of
changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
S-18
<PAGE> 944
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Partners X was organized on June 26, 1980, under the laws of the
State of California. Its primary business is real estate ownership and related
operations. Your partnership was formed for the purpose of making investments in
various types of real properties which offer potential capital appreciation and
cash distributions to its limited partners. Your partnership's investment
portfolio currently consists of the following three residential apartment
complexes: Greentree Apartments, a 178-unit complex in Mobile, Alabama; Carriage
Hills Apartments, a 143-unit complex in East Lansing, Michigan; and Vista Hills
Apartments, a 264-unit complex in El Paso, Texas, which is under contract to
sell to an unaffiliated party in November 1998. The general partner of your
partnership is Angeles Realty Corporation, which is a majority-owned subsidiary
of AIMCO. Insignia Residential Group, which is a majority-owned subsidiary of
AIMCO, serves as manager of the properties owned by your partnership. As of
September 15, 1998, there were 18,625 units of limited partnership interest
issued and outstanding, which were held of record by 1,860 limited partners.
Your partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone number at
that address is (303) 757-8101. For additional information about your
partnership, please refer to the annual and quarterly reports prepared by your
partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 945
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 946
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 947
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 948
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 949
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 950
SUMMARY FINANCIAL INFORMATION OF ANGELES PARTNERS X
The summary financial information of Angeles Partners X for the six months
ended June 30, 1998 and 1997 is unaudited. The summary financial information for
Angeles Partners X for the years ended December 31, 1997, 1996 and 1995 is based
on audited financial statements. This information should be read in conjunction
with such financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
incorporated by reference herein.
ANGELES PARTNERS X
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------- -------------------------------
1998 1997 1997 1996 1995
IN THOUSANDS, EXCEPT UNIT DATA ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues............................................ $ 1,662 $ 2,232 $ 9,010 $ 4,575 $ 4,488
Net Income (Loss)......................................... (256) (361) 3,635 (804) (909)
Net Income (Loss) per limited partnership unit............ (13.58) (19.16) 193.13 (42.69) (48.28)
Distributions per limited partnership unit................ -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- -------------------------------
1998 1997 1997 1996 1995
------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation.............. $ 5,286 $ 7,766 $ 5,459 $ 7,981 $ 8,572
Total Assets.............................................. 7,659 9,217 7,992 9,435 10,059
Notes Payable............................................. 14,257 18,683 14,321 18,774 18,452
Partners' Capital (Deficit)............................... (7,485) (11,206) (7,224) (10,845) (10,041)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING
PARTNERSHIP ANGELES PARTNERS X
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $0.00
</TABLE>
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<PAGE> 951
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $1.00 per unit to
$62.00 per unit from January 1, 1997 through September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$245.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $242.96 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
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<PAGE> 952
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
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<PAGE> 953
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Your
partnership has not paid any distributions on your units since 1985. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
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<PAGE> 954
deemed cash distribution. Although your general partner has no current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Residential Group,
which manages the properties owned by your partnership. Through subsidiaries,
AIMCO currently owns, in the aggregate, approximately a 1.2% interest in your
partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia
S-29
<PAGE> 955
Partnerships. Such offers would also allow the AIMCO Operating Partnership
an opportunity to increase its ownership interest in certain Insignia
Partnerships which would provide a larger asset and capital base and increased
diversification. As of October , 1998, the AIMCO Operating Partnership has
made offers to of the Insignia Partnerships, including your
partnership.
Previous Tender Offers
Prior to the Insignia Merger, a tender offer had been made to acquire units
of your partnership. On August 13, 1998, Cooper River Properties, L.L.C. then an
affiliate of Insignia and now our affiliate, commenced a tender offer pursuant
to which it has offered to acquire 8,000 units (representing approximately 43%
of the number outstanding) at a cash purchase price of $150 per unit.
Prior to such tender offer, Madison Partnership Liquidity Investors 64,
LLC, which was unaffiliated with Insignia and is not affiliated with AIMCO,
commenced a tender offer for $20 per unit up to a maximum of 4.9% of outstanding
units on August 7, 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
S-30
<PAGE> 956
partnership, without our offer. A number of advantages could result from
the continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units
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<PAGE> 957
have been equivalent to the dividends paid on AIMCO's Class A Common
Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 958
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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<PAGE> 959
, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of five units (except for units held by IRAs and Keogh Plans).
You may tender fractional units only if you are tendering all of your units. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 809 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 4.34% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint has been filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Greentree Apartments $ % $
Carriage Hills Apartments
Vista Hills Apartments
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Your partnership has not paid any distributions since 1985.
Therefore, distributions with respect to the Preferred OP Units and Common
OP Units that we are offering are expected to be , immediately
following our offer, than the distributions with respect to your units. See
"Comparison of Ownership of Your Units and AIMCO OP Units --
Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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<PAGE> 976
partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-51
<PAGE> 977
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $1.00 to $62.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 1,720 units (representing less than 9.23% of
the total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998) in sale transactions. Set forth in the table
below are the high and low sales prices of units for the quarterly periods from
January 1, 1995 to September 30, 1998, as reported by the general partner and by
The Partnership Spectrum, which is an independent, third-party source. The gross
sales prices reported by The Partnership Spectrum do not necessarily reflect the
net sales proceeds received by sellers of units, which typically are reduced by
commissions and other secondary market transaction costs to amounts less than
the reported prices; thus the AIMCO Operating Partnership does not know whether
the information compiled by The Partnership Spectrum is accurate or complete.
The transfer paperwork submitted to the general partner often does not include
the requested price information or contains conflicting information as to the
actual sales price. Accordingly, you should not rely upon this information as
being completely accurate.
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<PAGE> 978
ANGELES PARTNERS X
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $21.50 $ 50.00 (c) (c)
Second Quarter.................................. 13.50 45.00 50.00 55.00
First Quarter................................... 1.00 50.00 (d) (d)
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 40.54 42.00 21.00 35.00
Third Quarter................................... 10.00 62.00 35.00 62.00
Second Quarter.................................. 10.00 10.00 (d) (d)
First Quarter................................... 33.00 81.00 (d) (d)
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 10.00 47.04 33.00 81.00
Third Quarter................................... 15.00 39.99 37.00 37.00
Second Quarter.................................. 16.00 41.01 -- --
First Quarter................................... 15.00 36.00 -- --
Fiscal Year Ended December 31, 1995:
Fourth Quarter.................................. 45.00 155.00 -- --
Third Quarter................................... 1.00 17.00 -- --
Second Quarter.................................. -- -- -- --
First Quarter................................... 1.00 20.00 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Not yet published.
(d) No units were reported by the Partnership Spectrum as having been sold
during the quarter.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
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<PAGE> 979
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Carriage Hills Apartments was appraised in July 1997 by an
independent, third party appraiser, Joseph J. Blake & Associates, Inc. (the
"Appraiser"), in connection with a refinancing of the property. According to the
appraisal report, the scope of the appraisal included an inspection of the
property and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the Appraisal Standards
set forth in the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (known as "FIRREA"). The estimated market value of the fee simple estate of
the property specified in that appraisal report was $6,740,000. A copy of the
summary of the appraisal has been filed as an exhibit to the AIMCO Operating
Partnership's Tender Offer Statement on Schedule 14D-1 filed with the SEC.
Independent appraisals have not been conducted for any of the partnership's
other properties in the past three years.
General Partner's Estimates of Net Asset Value. An affiliate of your
general partner prepared an estimate of your partnership's net asset value per
unit in connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in August 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $245.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
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<PAGE> 980
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $94.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
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<PAGE> 981
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership
S-56
<PAGE> 982
and discussed with management the current and anticipated operating results of
your partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
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<PAGE> 983
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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<PAGE> 984
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash Flow from Operations (as defined of the AIMCO Operating Partnership's agreement of
in your partnership's agreement of limited partner- limited partnership (the "AIMCO Operating Partnership
ship). The termination date of your partnership is Agreement") or as provided by law. See "Description of
December 31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee or The purpose of the AIMCO Operating Partnership is to
other equity interests in, or long-term leasehold conduct any business that may be lawfully conducted by
interests in, improved residential, commercial and a limited partnership organized pursuant to the
industrial real properties (other than manufactured Delaware Revised Uniform Limited Partnership Act (as
home park communities) and to operate such properties amended from time to time, or any successor to such
with the primary objectives of endeavoring to preserve statute) (the "Delaware Limited Partnership Act"),
the purchasing power of capital, invest and offset the provided that such business is to be conducted in a
impact of inflation, provide capital growth and manner that permits AIMCO to be qualified as a REIT,
distributions among the partners tax-sheltered cash unless AIMCO ceases to qualify as a REIT. The AIMCO
flow. Subject to restrictions contained in your Operating Partnership is authorized to perform any and
partnership's agreement of limited partnership, your all acts for the furtherance of the purposes and
partnership may perform all acts necessary, advisable business of the AIMCO Operating Partnership, provided
or convenient to the business of your partnership that the AIMCO Operating Partnership may not take, or
including borrowing money and creating liens. refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
S-59
<PAGE> 985
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 37,500 units for cash time to the limited partners and to other persons, and
to selected persons who fulfill the requirements set to admit such other persons as additional limited
forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. Your partnership may not No action or consent by the OP Unitholders is required
issue units in exchange for property. in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. The general partner may entities in which it is or thereby becomes a
not purchase or lease any real property or acquire any participant upon such terms and subject to such
loan or lease from your partnership or sell or lease conditions consistent with the AIMCO Operating Part-
any real property, loan or lease to your partnership nership Agreement and applicable law as the general
either directly or through an affiliate. However, the partner, in its sole and absolute discretion, believes
general partner or an affiliate may purchase property to be advisable. Except as expressly permitted by the
in its own name and temporarily hold title thereto for AIMCO Operating Partnership Agreement, neither the
the purpose of facilitating its acquisition or general partner nor any of its affiliates may sell,
financing by your partnership if (1) the property is transfer or convey any property to the AIMCO Operating
purchased by your partnership for a price no greater Partnership, directly or indirectly, except pursuant to
than the cost of the property to the general partner or transactions that are determined by the general partner
its affiliate, (2) no difference exists in the interest in good faith to be fair and reasonable.
rates of the loans secured by the property at the time
acquired by the general partner or its affiliates and
at the time acquired by your partnership and (3)
neither the general partner nor its affiliates receive
any economic advantage by reason of holding or having
held title to the property. Your partnership may not
make loans to the general partner or its affiliates but
the general partner may lend money to your partnership
if such loan is made at interest rates and charges not
in excess of the rates and charges which would be
charged by unrelated banks in a competitive position or
in any event in excess of the prime interest rate which
is charged from time to time by Bank of America
National Trust and Savings Association, Los Angeles,
California, on ninety-day unsecured loans to
responsible and substantial borrowers. Unless certain
conditions are met, the general partner may not make a
permanent loan to your partnership nor may your
partnership finance the purchase of your partnership's
property by use of a "wraparound" or "all-inclusive"
note and mortgage or deed of trust under which the
general partner or any of its
</TABLE>
S-60
<PAGE> 986
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
affiliates are the obligee or secured party. Your
partnership is also prohibited from entering into any
loan, financing or other investment transaction with a
REIT or similar lending institution which may in the
future be organized by the general partner or any of
its affiliates unless such loan, financing or other
investment transaction is competitive in price and
terms with financing or similar investment transaction
available to your partnership from nonaffiliated
lending institutions making similar loans or engaging
in similar transactions. Your partnership may not grant
to the general partner or its affiliates an exclusive
right or an exclusive employment to sell your
partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of assets, Partnership has credit agreements that restrict, among
subject any asset of your partnership to one or more other things, its ability to incur indebtedness. See
mortgages, deeds of trust or other security interest, "Risk Factors -- Risks of Significant Indebtedness" in
so that the aggregate amount of indebtedness secured by the accompanying Prospectus.
mortgages, deeds or trust and other security interests
to which all partnership assets are subject,
immediately after such action, is greater than 80% of
the aggregate amount of the purchase price of all
assets. The general partner may not acquire any real
property which, at the date of the acquisition, is
subject to indebtedness secured by a mortgage, deed of
trust or other security interest on the real property
having an unpaid principal balance immediately after
the acquisition equal to less than 40% of the purchase
price of the real property paid by your partnership.
Your partnership may not issue debt securities to the
public. In connection with the purchase of property by
your partnership, the general partner must use its best
efforts, subject to market conditions, to ensure that
any first mortgage financing incurred in connection
with such purchase which contains a provision for a
balloon payment, (1) such balloon payment will not be
due and payable prior to ten years from the later of
the inception date of the loan or the acquisition date
of the property, (2) such loan will provide for
periodic payment in amounts which would be sufficient
to completely repay the loan over a period of not less
than twenty nor more than thirty years and (3) the
maturity date of the balloon payment will be at least
three years beyond the end of your partnership's
estimated holding period for the property. Secondary
financing which is more than 10% of the purchase price
of the property which incurred in connection with a
purchase, if any, will be fully amortizing or if not
fully amortizing will not be due and payable during the
expected holding period of the property. No creditor
who makes a non-recourse loan to your partnership will
have or acquire at any time, as a result of making such
loan, any direct or indirect interest in the profits,
capital or property of your partnership, other than as
a secured creditor.
</TABLE>
S-61
<PAGE> 987
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, the general partner has the management power over the business and affairs of the
right, power and authority, on behalf of your AIMCO Operating Partnership. The OP Unitholders have
partnership, and in its name, to exercise all of the the right to vote on certain matters described under
rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without limited partners under California Units -- Voting Rights" below. The general partner may
law. Limited partners have no right to participate in not be removed by the OP Unitholders with or without
the management or conduct of your partnership's cause.
business or affairs nor any power or authority to act
for or on behalf of your partnership in any respect In addition to the powers granted a general partner of
whatsoever. a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. In the event that a claim for indemnification settlements and other amounts incurred in connection
against liabilities arising under the Securities Act of with any actions relating to the operations of the
1933, as amended (other than for the payment by your AIMCO Operating Partnership, as set forth in the AIMCO
partnership of expenses incurred or paid by the general Operating Partnership Agreement. The Delaware Limited
partner in the successful defense of any action, suit Partnership Act provides that
or
</TABLE>
S-62
<PAGE> 988
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
proceeding) is asserted by the general partner in subject to the standards and restrictions, if any, set
connection with the units, your partnership will, forth in its partnership agreement, a limited
unless in the opinion of its counsel the matter is partnership may, and shall have the power to, indemnify
settled by controlling precedent, submit to a court of and hold harmless any partner or other person from and
appropriate jurisdiction the question of whether such against any and all claims and demands whatsoever. It
indemnification by it is against public policy as is the position of the Securities and Exchange Commis-
expressed in the Securities Act of 1933, as amended and sion that indemnification of directors and officers for
will inform the court of the position of the SEC with liabilities arising under the Securities Act is against
respect to such indemnification. Your partnership as public policy and is unenforceable pursuant to Section
agreed to be governed by the court's final adjudication 14 of the Securities Act of 1933.
of such issue.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner and the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership. No limited partner may controlling interest in the AIMCO Operating Partner-
substitute a transferee of his units in such limited ship. Additionally, the AIMCO Operating Partnership
partner's place without the consent of the general Agreement contains restrictions on the ability of OP
partner which may be withheld at the sole discretion of Unitholders to transfer their OP Units. See
the general partner. "Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership and (3) deletes or adds any provision the OP Unitholders. The general partner will seek the
required by any applicable law. Your partnership's written consent of the OP Unitholders on the proposed
agreement of limited partnership may not be amended to amendment or will call a meeting to vote thereon. See
change your partnership to a general partnership, "Description of OP Units -- Amendment of the AIMCO
extend the term of your partnership, change the Operating Partnership Agreement" in the accompanying
liability of the general partner or the limited Prospectus.
partners. All other amendments to your partnership's
agreement of limited partnership must be approved by
the limited partners owning more than 50% of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership is entitled to The general partner does not receive compensation for
receive an annual management fee equal to 5% of the Net its services as general partner of the AIMCO Operating
Cash from Operations for each year for its services as Partnership. However, the general partner is entitled
general partner of your partnership so long as the to payments, allocations and distributions in its
limited partners receive 5% per annum on their capital capacity as general partner of the AIMCO Operating
investment and may also receive reimbursement for Partnership. In addition, the AIMCO Operating Part-
expenses incurred in such capacity nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
S-63
<PAGE> 989
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for the negligence, no OP Unitholder has personal liability for
debts, liabilities, or obligations of your partnership the AIMCO Operating Partnership's debts and
in excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner and its affiliates may acquire real properties Operating Partnership Agreement expressly limits the
for their own account, or engage in the acquisition, liability of the general partner by providing that the
development, operation or management of real estate on general partner, and its officers and directors will
behalf of other entities, including business ventures not be liable or accountable in damages to the AIMCO
similar to, related to or in direct or indirect Operating Partnership, the limited partners or
competition with any business of your partnership. assignees for errors in judgment or mistakes of fact or
Neither your partnership nor any other partner will law or of any act or omission if the general partner or
have any right in or to such other business ventures or such director or officer acted in good faith. See
the income or profits derived therefrom. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and
</TABLE>
S-64
<PAGE> 990
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
loss from the AIMCO Operating Partnership can only be
offset against other income and loss from the AIMCO
Operating Partnership). Income of the AIMCO Operating
Partnership, however, attributable to dividends from
the Management Subsidiaries (as defined below) or
interest paid by the Management Subsidiaries does not
qualify as passive activity income and cannot be offset
against losses from "passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
<TABLE>
<CAPTION>
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner and ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are Partnership Agree- Part-
</TABLE>
S-65
<PAGE> 991
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
part of single transaction of ment, the affirmative vote or nership or the admission of a
substantially all of the assets of consent of holders of at least 50% successor general partner.
your partnership. of the outstanding Preferred OP
Units will be necessary for Under the AIMCO Operating Partner-
The general partner may cause the effecting any amendment of any of ship Agreement, the general partner
dissolution of your partnership by the provisions of the Partnership has the power to effect the
retiring. In such event, your Unit Designation of the Preferred acquisition, sale, transfer,
partnership may be continued if, OP Units that materially and exchange or other disposition of
within ninety days of the retire- adversely affects the rights or any assets of the AIMCO Operating
ment, the limited partners holding preferences of the holders of the Partnership (including, but not
more than 50% of the units elect a Preferred OP Units. The creation or limited to, the exercise or grant
substitute general partner who is issuance of any class or series of of any conversion, option,
willing to continue your partnership units, including, privilege or subscription right or
partnership. without limitation, any partner- any other right available in
ship units that may have rights connection with any assets at any
senior or superior to the Preferred time held by the AIMCO Operating
OP Units, shall not be deemed to Partnership) or the merger,
materially adversely affect the consolidation, reorganization or
rights or preferences of the other combination of the AIMCO
holders of Preferred OP Units. With Operating Partnership with or into
respect to the exercise of the another entity, all without the
above described voting rights, each consent of the OP Unitholders.
Preferred OP Units shall have one
(1) vote per Preferred OP Unit. The general partner may cause the
dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
Holders of any other Pre-
</TABLE>
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<PAGE> 992
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
lative Preferred Stock. Such ferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fraction unit and if on any securities exchange. The transferability of the OP Units.
such assignment is less than all of Preferred OP Units are subject to Until the expiration of one year
the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
five units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignment taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any person, subject to
your partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor without the consent of the general conditions specified in the AIMCO
receives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have complied with discretion. After the expiration of right of first refusal. See
such other conditions as deter- one year, such holders of Preferred "Description of OP Units --
mined by the general partner to OP Units has the right to transfer Transfers and Withdrawals" in the
comply with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to
transferee may be substi-
</TABLE>
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<PAGE> 993
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
tuted as a limited partner if: (1) any person, subject to the After the first anniversary of
the general partner consents in satisfaction of certain conditions becoming a holder of Common OP
writing, which consent may be specified in the AIMCO Operating Units, an OP Unitholder has the
granted or denied in the sole Partnership Agreement, including right, subject to the terms and
discretion of the general partner, the general partner's right of conditions of the AIMCO Operating
(2) the transferor elects to become first refusal. Partnership Agreement, to require
a substitute limited partner by the AIMCO Operating Partnership to
delivering to the general partner a After a one-year holding period, a redeem all or a portion of the
written notice, executed and holder may redeem Preferred OP Common OP Units held by such party
acknowledge by the assignor and Units and receive in exchange in exchange for a cash amount based
assignee of such election, (3) the therefor, at the AIMCO Operating on the value of shares of Class A
assignee executes and acknowledges Partnership's option, (i) subject Common Stock. See "Description of
such other instruments that the to the terms of any Senior Units, OP Units -- Redemption Rights" in
general partner may require cash in an amount equal to the the accompanying Prospectus. Upon
including an adoption of your Liquidation Preference of the receipt of a notice of redemption,
partnership's agreement of limited Preferred OP Units tendered for the AIMCO Operating Partnership
partnership, and (4) the assignee redemption, (ii) a number of shares may, in its sole and absolute
pays the partnership for its of Class I Cumulative Preferred discretion but subject to the
expenses incurred in the Stock of AIMCO that pay an restrictions on the ownership of
transaction. aggregate amount of dividends yield Class A Common Stock imposed under
equivalent to the distributions on AIMCO's charter and the transfer
the Preferred OP Units tendered for restrictions and other limitations
redemption and are part of a class thereof, elect to cause AIMCO to
or series of preferred stock that acquire some or all of the tendered
is then listed on the New York Common OP Units in exchange for
Stock Exchange or another national Class A Common Stock, based on an
securities exchange, or (iii) a exchange ratio of one share of
number of shares of Class A Common Class A Common Stock for each Com-
Stock of AIMCO that is equal in mon OP Unit, subject to adjustment
Value to the Liquidation Preference as provided in the AIMCO Operating
of the Preferred OP Units tendered Partnership Agreement.
for redemption. The Preferred OP
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 994
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 995
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 996
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 997
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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<PAGE> 998
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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<PAGE> 999
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
<TABLE>
<CAPTION>
OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
S-74
<PAGE> 1000
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
S-75
<PAGE> 1001
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
S-76
<PAGE> 1002
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership is entitled to receive an annual management fee equal to 5%
of the Net Cash from Operations for each year for its services as general
partner of your partnership so long as the limited partners receive 5% per annum
on their capital investment and may also receive reimbursement for expenses
incurred in such capacity. The general partner of your partnership received fees
and reimbursements of $152,000 in 1996, 142,000 in 1997 and $50,000 for the six
months ended June 30, 1998. The property manager received management fees of
$227,000 in 1996, $216,000 in 1997 and $83,000 for the first six months of 1998.
The AIMCO Operating Partnership has no current intention of changing the fee
structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-77
<PAGE> 1003
YOUR PARTNERSHIP
GENERAL
Angeles Partners X was organized on June 26, 1980, under the laws of the
State of California. Its primary business is real estate ownership and related
operations. Your partnership was formed for the purpose of making investments in
various types of real properties which offer potential capital appreciation and
cash distributions to its limited partners. Your partnership's investment
portfolio currently consists of the following three residential apartment
complexes: Greentree Apartments, a 178-unit complex in Mobile, Alabama; Carriage
Hills Apartments, a 143-unit complex in East Lansing, Michigan; and Vista Hills
Apartments, a 264-unit complex in El Paso, Texas, which is under contract to
sell to an unaffiliated party in November 1998. The general partner of your
partnership is Angeles Realty Corporation, which is a majority-owned subsidiary
of AIMCO. Insignia Residential Group, which is a majority-owned subsidiary of
AIMCO, serves as manager of the properties owned by your partnership. As of
September 15, 1998, there were 18,625 units of limited partnership interest
issued and outstanding, which were held of record by 1,860 limited partners.
Your partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone number at
that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-K SB, as amended, for the year ended December
31, 1997;
- Quarterly Reports on Form 10-Q SB, as amended, for the quarters ended
March 31, 1998 and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated April 30, 1981, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner had, on average,
begun selling their properties during the fifth year after the investments were
made and had sold all of their properties after eight years of ownership. The
prospectus further stated, however, that the general partner was unable to
predict how long the partnership would remain invested in the properties and
that the partnership acquired such properties for investment rather than resale.
In any event, according to the prospectus, the general partner anticipated that
a disposition of the properties would depend on, among other things, the current
real estate and money markets, economic climate and income tax consequences to
the limited partners. Under your partnership's agreement of limited partnership,
the term of the partnership will continue until December 31, 2035, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
S-78
<PAGE> 1004
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In the event that a claim for indemnification against liabilities
arising under the Securities Act of 1933, as amended (other than for the payment
by your partnership of expenses incurred or paid by the general partner in the
successful defense of any action, suit or proceedings) is asserted by the
general partner in connection with the units, your partnership will, unless in
the opinion of its counsel the matter is settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended and will inform the court of the position of the SEC
with respect to such indemnification. Your partnership has agreed to be governed
by the court's final adjudication of such issue.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
S-79
<PAGE> 1005
DISTRIBUTIONS
Your partnership has not paid any distributions during the last three
years. The original cost per unit was $1,000.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 1.2% interest in your partnership, including 135 units held by us and the
interest held by Angeles Realty Corporation, as general partner of your
partnership. In addition to the tender offers described under "Background and
Reasons for the Offer -- Previous Tender Offers". Except as set forth above,
neither the AIMCO Operating Partnership, nor, to the best of its knowledge, any
of its affiliates, (i) beneficially own or have a right to acquire any units,
(ii) have effected any transactions in the units in the past 60 days, or (iii)
have any contract, arrangement, understanding or relationship with any other
person with respect to any securities of your partnership, including, but not
limited to, contracts, arrangements, understandings or relationships concerning
transfer or voting thereof, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving or withholding
of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $145,326
1995........................................................ 124,000
1996........................................................ 152,000
1997........................................................ 142,000
1998 (through June 30)...................................... 50,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- --------
<S> <C>
1994........................................................ $217,652
1995........................................................ 222,000
1996........................................................ 227,000
1997........................................................ 216,000
1998 (through June 30)...................................... 83,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-80
<PAGE> 1006
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT Merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-81
<PAGE> 1007
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Partners X appearing in
Angeles Partners X Annual Report (Form 10-K SB) for the year ended December 31,
1997, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
S-82
<PAGE> 1008
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 1009
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1010
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 1011
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership and the directors of AIMCO, are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1012
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1013
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1014
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1015
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1016
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1017
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES PARTNERS XI
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $229.00 per
unit and an affiliate estimated the pro forma net liquidation value of
your units to be $208.00 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in two properties to holding an interest in our
large portfolio of properties. In the future, the properties owned by
your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1018
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP Units.. S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-19
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Partners XI................................ S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounting Treatment......................... S-44
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-54
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-55
Conclusions.................................. S-56
Assumptions, Limitations and
Qualifications............................. S-56
Compensation and Material Relationships...... S-57
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-58
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-64
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
</TABLE>
i
<PAGE> 1019
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
Additional Information Concerning Your
Partnership................................ S-77
Term of the Partnership...................... S-77
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-77
Property Management.......................... S-78
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-78
Distributions................................ S-78
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-79
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-79
LEGAL MATTERS.................................. S-80
EXPERTS........................................ S-80
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1020
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Partners XI. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1021
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1022
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Since January 1, 1995, your partnership has paid a single distribution of
$0.61 per unit in 1996. We will pay fixed quarterly distributions of
$ per unit on the Tax-Deferral % Preferred OP Units before
any distributions are paid to holders of Tax-Deferral Common OP Units. We
pay quarterly distributions on the Tax-Deferral Common OP Units based on
our funds from operations for that quarter. For the six months ended June
30, 1998, we paid distributions of $1.125 on each of the Tax-Deferral
Common OP Units (equivalent to $2.25 on an annual basis). This is
equivalent to distributions of $ per year on the number of
Tax-Deferral % Preferred OP Units, or $ per year on the number of
Tax-Deferral Common OP Units, that you would receive in an exchange for
each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1023
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $1.00 per unit to $100.00 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, an
affiliate of your general partner estimated the net asset value of your
units to be $220.00 per unit and an affiliate of your general partner
estimated the pro forma net liquidation value of your units to be $208.00
per unit. However, we do not believe that these valuations represent the
current fair market value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 1024
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. You may tender fractional units
only if you are tendering all of your units or if you and the transferee
each hold at least 5 units after the transfer.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 1025
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 1026
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 1027
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$229.00 per unit. and an affiliate of your general partner estimated the pro
forma net liquidation value of your units to be $200.00 per unit. However, we do
not believe that these valuations represent the current fair market value of
your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $1.00 per unit to $100.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
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deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages two
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
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DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
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COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
0.2% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in significant amounts of
taxable income to you and your partners. Another option for liquidation of
your
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investment would be to sell your units in a private transaction. Any such
sale could be at a very substantial discount from your pro rata share of
the fair market value of your partnership's property and might involve
significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 1036
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $1.00 to $100.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 1037
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner. Also, your partnership is limited as to the number of limited partner
interests it may issue while the AIMCO Operating Partnership has no such
limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to 7.5% of the Net Cash from Operations for each
year for its services as general partner of your partnership so long as the
limited partners receive 5% per annum on their capital investment. The general
partner may also receive reimbursement for expenses incurred in its capacity as
general partner. The general manager received total fees and reimbursements of
$65,000 for the first six months of 1998. The property manager received
management fees of $184,000 for the first six months of 1998. We have no current
intention of changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
S-18
<PAGE> 1038
YOUR PARTNERSHIP
Angeles Partners XI was organized on February 14, 1983, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following properties: Fox Run I
and II Apartments, a 776-unit complex in Plainsboro, New Jersey. Your
partnership also has a 41.1% investment in the Princeton Meadows Golf Course
Joint Venture in Plainsboro, New Jersey. The general partner of your partnership
is Angeles Realty Corporation II, which is a majority-owned subsidiary of AIMCO.
Insignia Residential Group, L.P., which is a majority-owned subsidiary of AIMCO,
serves as manager of the properties owned by your partnership. As of September
15, 1998, there were 80 units of limited partnership interest issued and
outstanding, which were held of record by 3,988 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101. For additional information about your partnership,
please refer to the annual and quarterly reports prepared by your partnership
which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1039
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, the period July 29, 1994 (the date of inception) through December
31, 1994, and for the AIMCO Properties, L.P. Predecessors for the period January
10, 1994 through July 28, 1994, and the year ended December 31, 1993, is based
on audited financial statements. This information should be read in conjunction
with such financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in AIMCO Properties, L.P.'s Registration Statement on Form 10, as
amended, which is incorporated by reference herein. All dollar values are in
thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(a) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1040
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1041
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1042
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1043
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1044
SUMMARY FINANCIAL INFORMATION OF ANGELES PARTNERS XI
The summary financial information of Angeles Partners XI for the six months
ended June 30, 1998 and 1997 is unaudited. The summary financial information for
Angeles Partners XI for the years ended December 31, 1997, 1996, and 1995 is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein.
ANGELES PARTNERS XI
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $ 4,084 $ 3,530 $ 7,160 $ 6,965 $ 9,768
Net Income (Loss)........................................... 227 (323) (673) 1,320 556
Net Income (Loss) per limited partnership unit.............. 5.68 (8.07) (16.81) (32.80) 19.29
Distributions per limited partnership unit.................. -- -- -- 0.61 --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ 11,388 12,582 11,994 13,133 14,111
Total Assets................................................ 14,406 14,676 14,273 15,377 15,841
Notes Payable............................................... 31,270 31,273 31,272 31,275 30,659
Partners' Capital (Deficit)................................. (18,331) (18,208) (18,558) (17,885) (16,541)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING
PARTNERSHIP ANGELES PARTNERS XI
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $0.00
</TABLE>
S-25
<PAGE> 1045
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $1.00 per unit to
$100.00 per unit from January 1, 1997 to September 30, 1998. As of June 30,
1998, an affiliate of your general partner estimated the net asset value of your
units to be $229.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the pro forma net liquidation value of your units to be $208.00 per
unit. However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 1046
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 1047
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages two properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Since
January 1, 1995, your partnership has paid a single distribution of $0.61 per
unit in 1996. Therefore, distributions with respect to the Preferred OP Units
and Common OP Units that we are offering are expected to be , immediately
following our offer, than the distributions with respect to your units. See
"Comparison of Ownership of Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
S-28
<PAGE> 1048
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Residential Group,
L.P., which manages the properties owned by your partnership. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 0.2%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
S-29
<PAGE> 1049
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a tender offer had been made to acquire units
of your partnership. In August 1998, Cooper River Properties, L.L.C., then an
affiliate of Insignia and now our affiliate, commenced a tender offer for $150
per unit and purchased units in , 1998.
Prior to such tender offer, in August 1998, Madison Partnership
Liquidity Investors 64, LLC, which was unaffiliated with Insignia and is not
affiliated with AIMCO, commenced a tender offer for $33.00 per unit and
purchased units in , 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
S-30
<PAGE> 1050
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
S-31
<PAGE> 1051
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
S-32
<PAGE> 1052
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for Tendering
Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE BY
REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units. You
may tender fractional units only if you are tendering all of your units or if
you and the transferee each hold at least 5 units after the transfer. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
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THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 1,034 units in your
partnership have been transferred during the twelve months ended December 31,
1997(representing approximately 2.61% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Fox Run Apartments.......................... $ % $
Princeton Meadow Golf Course Joint
Venture...................................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Since January 1, 1996, your partnership has paid only a single
distribution of $0.61 per unit in 1996. Therefore, distributions with
respect to the Preferred OP Units and Common OP Units that we are offering
are expected to be , immediately following our offer, than the
distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
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apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $1.00 to $100.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 3,054 units (representing less than 7.7% of
the total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to September 30, 1998, as reported by the
general partner. The transfer paperwork submitted to the general partner often
does not include the requested price information or contains conflicting
information as to the actual sales price. Accordingly, you should not rely upon
this information as being completely accurate.
ANGELES PARTNERS XI
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER(a)
----------------------
LOW SALES HIGH SALES
PRICE PRICE
PER UNIT PER UNIT
--------- ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter............................................. $30.00 $ 70.00
Second Quarter............................................ 16.00 38.00
First Quarter............................................. 23.00 100.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................................ 26.00 44.00
Third Quarter............................................. 1.00 42.00
Second Quarter............................................ 5.00 43.00
First Quarter............................................. 10.00 50.90
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................................ 6.83 48.50
Third Quarter............................................. 17.50 54.80
Second Quarter............................................ 5.00 42.00
First Quarter............................................. 15.00 68.00
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
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<PAGE> 1072
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Fox Run Apartments was appraised in March 1996 by an
independent, third party appraiser, Koeppel Tener Real Estate Services, Inc.
(the "Appraiser"), in connection with a refinancing of the property. According
to the appraisal report, the scope of the appraisal included an inspection of
the property and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the Appraisal Standards
set forth in the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (known as "FIRREA"). The estimated market value of the fee simple estate of
the property specified in that appraisal report was $32,600,000. A copy of the
summary of the appraisal has been filed as an exhibit to the AIMCO Operating
Partnership's Tender Offer Statement on Schedule 14D-1 filed with the SEC.
Independent appraisals have not been conducted for any of the partnership's
other properties in the past three years.
General Partner's Annual Estimates of Net Asset Value. An affiliate of your
general partner prepared an estimate of your partnership's net asset value per
unit in connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $229.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after
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<PAGE> 1073
provision in full for all of the other known liabilities of your
partnership. This net asset value does not take into account (i) timing
considerations or (ii) costs associated with winding up the partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of net
asset value per unit does not necessarily represent either the fair market value
of a unit or the amount a limited partner reasonably could expect to receive if
the partnership's properties were sold and the partnership was liquidated. For
this reason, the AIMCO Operating Partnership considered this net asset value
estimate to be less meaningful in determining the offer consideration than the
analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $132.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partner of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's other known liabilities.
This net asset value estimate did not take into account (i) timing
considerations or (ii) costs associated with winding up your partnership.
Therefore, the AIMCO Operating Partnership believes that this estimate of the
net asset value of a unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
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<PAGE> 1074
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and
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<PAGE> 1075
local property management personnel were interviewed concerning your
partnership's properties and local market conditions. Stanger also reviewed and
relied upon information provided by your partnership and AIMCO, including, but
not limited to, financial schedules of historical and current rental rates,
occupancies, income, expenses, reserve requirements, cash flow and related
financial information; property descriptive information including unit mix; and
information relating to the condition of the properties, including any deferred
maintenance, capital budgets, status of ongoing or newly planned property
additions, reconfigurations, improvements and other factors affecting the
physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect
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the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the partnership's properties or
other balance sheet assets and liabilities or other information reviewed between
the date of such information provided and the date of the Fairness Opinion; that
your partnership, AIMCO, and the management of the partnership's properties are
not aware of any information or facts that would cause the information supplied
to Stanger to be incomplete or misleading; that the highest and best use of the
partnership's properties is as improved; and that all calculations were made in
accordance with the terms of your partnership's agreement of limited
partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-57
<PAGE> 1077
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests in conduct any business that may be lawfully conducted by
residential, commercial and industrial real properties, a limited partnership organized pursuant to the
either directly or indirectly including through Delaware Revised Uniform Limited Partnership Act (as
investments in partnerships or joint ventures with amended from time to time, or any successor to such
others. Subject to restrictions contained in your statute) (the "Delaware Limited Partnership Act"),
partnership's agreement of limited partnership, your provided that such business is to be conducted in a
partnership may perform all acts necessary, advisable manner that permits AIMCO to be qualified as a REIT,
or convenient to the business of your partnership unless AIMCO ceases to qualify as a REIT. The AIMCO
including borrowing money and creating liens. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
S-58
<PAGE> 1078
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner may make offerings of units upon such contributions as may be established by the general
terms and conditions and in such amounts as the general partner in its sole discretion. The net capital
partner in its sole discretion deems reasonable, so contribution need not be equal for all OP Unitholders.
long as such terms and conditions are no more favorable No action or consent by the OP Unitholders is required
than those offered to the limited partners who in connection with the admission of any additional OP
purchased their units under the terms and conditions of Unitholder. See "Description of OP Units -- Management
the first offering. The capital contribution need not by the AIMCO GP" in the accompanying Prospectus.
be equal for all limited partners and no action or Subject to Delaware law, any additional partnership
consent is required in connection with the admission of interests may be issued in one or more classes, or one
any additional limited partners. Your partnership may or more series of any of such classes, with such
not issue units in exchange for property. designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. The general partner may entities in which it is or thereby becomes a
not purchase or lease any real property from your participant upon such terms and subject to such
partnership or sell or lease any real property to your conditions consistent with the AIMCO Operating Part-
partnership either directly or through an affiliate. nership Agreement and applicable law as the general
However, the general partner or an affiliate may partner, in its sole and absolute discretion, believes
purchase property in its own name and temporarily hold to be advisable. Except as expressly permitted by the
title thereto for the purpose of facilitating its AIMCO Operating Partnership Agreement, neither the
acquisition or financing by your partnership if (1) the general partner nor any of its affiliates may sell,
property is purchased by your partnership for a price transfer or convey any property to the AIMCO Operating
no greater than the cost of the property to the general Partnership, directly or indirectly, except pursuant to
partner or its affiliate, (2) no difference exists in transactions that are determined by the general partner
the interest rates of the loans secured by the property in good faith to be fair and reasonable.
at the time acquired by the general partner or its
affiliates and at the time acquired by your partnership
and (3) neither the general partner nor its affiliates
receive any economic advantage by reason of holding or
having held title to the property. Your partnership may
not make loans to the general partner or its affiliates
but the general partner may lend money to your partner-
ship if such loan is made at interest rates and charges
not in excess of the rates and charges which would be
charged by unrelated banks in a competitive position or
in any event in excess of the prime interest rate which
is charged from time to time by Bank of America
National Trust and Savings Association, Los Angeles,
California, on ninety-day unsecured loans to
responsible and substantial borrowers. Unless certain
conditions are met, the general partner may not make a
permanent loan to your partnership nor may your
partnership finance the purchase of your partnership's
property by use of a "wraparound" or "all-inclusive"
note and mortgage or deed of trust under which the
general partner or any of its affiliates are the
obligee or secured party.
</TABLE>
S-59
<PAGE> 1079
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
Your partnership may not grant to the general partner
or its affiliates an exclusive right or an exclusive
employment to sell your partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of assets, Partnership has credit agreements that restrict, among
subject any asset of your partnership to one or more other things, its ability to incur indebtedness. See
mortgages, deeds of trust or other security interest, "Risk Factors -- Risks of Significant Indebtedness" in
so that the aggregate amount of indebtedness secured by the accompanying Prospectus.
mortgages, deeds or trust and other security interests
to which all partnership assets are subject,
immediately after such action, is greater than 80% of
the aggregate amount of the purchase price of all
assets. Your partnership may not issue debt securities
to the public. The general partner may not acquire any
real property which, at the date of the acquisition, is
subject to indebtedness secured by a mortgage, deed of
trust or other security interest on the real property
having an unpaid principal balance immediately after
the acquisition equal to less than 40% of the purchase
price of the real property paid by your partnership. No
creditor who makes a non-recourse loan to your
partnership will have or acquire at any time, as a
result of making such loan, any direct or indirect
interest in the profits, capital or property of your
partnership, other than as a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, the general partner has the management power over the business and affairs of the
right, power and authority, on behalf of your AIMCO Operating Partnership. The OP Unitholders have
partnership, and in its name, to exercise all of the the right to vote on certain matters described under
rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without limited partners under California Units -- Voting Rights" below. The general partner may
law. Limited partners have no right to participate in not be removed by the OP Unitholders with or without
the management or conduct of your partnership's cause.
business or affairs nor any power or authority to act
for or on behalf of your partnership in any respect In addition to the powers granted a general partner of
whatsoever. a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur
</TABLE>
S-60
<PAGE> 1080
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
debt or enter into other similar credit, guarantee,
financing or refinancing arrangements for any purpose
upon such terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. In the event that a claim for indemnification settlements and other amounts incurred in connection
against liabilities arising under the Securities Act of with any actions relating to the operations of the
1933, as amended (other than for the payment by your AIMCO Operating Partnership, as set forth in the AIMCO
partnership for expenses incurred or paid by the Operating Partnership Agreement. The Delaware Limited
general partner in the successful defense of any Partnership Act provides that subject to the standards
action, suit or proceeding) is asserted by the general and restrictions, if any, set forth in its partnership
partner in connection with the units, your partnership agreement, a limited partnership may, and shall have
will, unless in the opinion of its counsel, the matter the power to, indemnify and hold harmless any partner
is settled by controlling precedent, submit to a court or other person from and against any and all claims and
of appropriate jurisdiction the question of whether demands whatsoever. It is the position of the
such indemnification by it is against public policy as Securities and Exchange Commission that indemnification
expressed in the Securities Act of 1933, as amended and of directors and officers for liabilities arising under
will agree to be governed by the court's final the Securities Act is against public policy and is
adjudication of such issue. unenforceable pursuant to Section 14 of the Securities
Act of 1933.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner and the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership. The general partner may admit controlling interest in the AIMCO Operating Partner-
additional general partners without the consent of the ship. Additionally, the AIMCO Operating Partnership
limited partners. No limited partner may substitute a Agreement contains restrictions on the ability of OP
transferee of his units in such limited partner's place Unitholders to transfer their OP Units. See
without the consent of the general partner which may be "Description of OP Units -- Transfers and Withdrawals"
withheld at the sole discretion of the general partner. in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited the general
</TABLE>
S-61
<PAGE> 1081
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partners if such amendment: (1) adds to the partner may, without the consent of the OP Unitholders,
representation, duties, or obligations of the general amend the AIMCO Operating Partnership Agreement,
partner or its affiliates or surrenders any right or amendments to the AIMCO Operating Partnership Agreement
power granted to the general partner or its affiliates require the consent of the holders of a majority of the
for the benefit of the limited partner, (2) cures any outstanding Common OP Units, excluding AIMCO and
ambiguity, corrects or supplements any provision which certain other limited exclusions (a "Majority in
may be inconsistent with any other provision or makes Interest"). Amendments to the AIMCO Operating
any other provision with respect to matters or Partnership Agreement may be proposed by the general
questions arising under your partnership's agreement of partner or by holders of a Majority in Interest.
limited partnership consistent with the provisions of Following such proposal, the general partner will
your partnership's agreement of limited partnership, submit any proposed amendment to the OP Unitholders.
(3) deletes or adds any provision required by any The general partner will seek the written consent of
applicable law, (4) reflects any reduction of the the OP Unitholders on the proposed amendment or will
partners' capital accounts and (5) reflects a change in call a meeting to vote thereon. See "Description of OP
the name or the location of the principal place of Units -- Amendment of the AIMCO Operating Partnership
business of your partnership. Your partnership's agree- Agreement" in the accompanying Prospectus.
ment of limited partnership may not be amended to
change your partnership to a general partnership,
extend the term of your partnership, allow the
expulsion of the non-managing general partner without
the simultaneous expulsion of the managing general
partner or change the liability of the general partner
or the limited partners. Any amendment which diminishes
the rights of the general partner may not be made
without the consent of the general partner or all of
the limited partners. All other amendments to your
partnership's agreement of limited partnership must be
approved by the limited partners owning more than 50%
of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership receives an The general partner does not receive compensation for
annual management fee equal to 7.5% of the Net Cash its services as general partner of the AIMCO Operating
from Operations for each year for its services as Partnership. However, the general partner is entitled
general partner of your partnership so long as the to payments, allocations and distributions in its
limited partners receive 5% per annum on their capital capacity as general partner of the AIMCO Operating
investment and may also receive reimbursement for Partnership. In addition, the AIMCO Operating Part-
expenses incurred in such capacity. nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not for the debts, negligence, no OP Unitholder has personal liability for
liabilities, or obligations of your partnership in the AIMCO Operating Partnership's debts and
excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
S-62
<PAGE> 1082
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner may delegate any or all of its powers, rights Operating Partnership Agreement expressly limits the
and obligations under your partnership's agreement of liability of the general partner by providing that the
limited partners and in furtherance of any such general partner, and its officers and directors will
delegation may appoint, employ or contract with any not be liable or accountable in damages to the AIMCO
person for the account of your partnership for the Operating Partnership, the limited partners or
transaction of the business of your partnership, which assignees for errors in judgment or mistakes of fact or
person may, under the supervision of the general law or of any act or omission if the general partner or
partner, perform such acts or services for your such director or officer acted in good faith. See
partnership as the general partnership may approve. The "Description of OP Units -- Fiduciary Responsibilities"
general partner and its affiliates may acquire real in the accompanying Prospectus.
properties for their own account, or engage in the
acquisition, development, operation or management of
real estate on behalf of other entities, including
business ventures similar to, related to or in direct
or indirect competition with any business of your
partnership. Neither your partnership nor any other
partner will have any right in or to such other
business ventures or the income or profits derived
therefrom.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
</TABLE>
S-63
<PAGE> 1083
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner and ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership. holders of at least 50% of the
outstanding Preferred OP Units will Under the AIMCO Operating Partner-
A general partner may cause the be necessary for effecting any ship Agreement, the general partner
dissolution of your partnership by amendment of any of the provisions has the power to effect the
retiring. In such event, your of the Partnership Unit Desig- acquisition, sale, transfer,
partnership may be continued by the nation of the Preferred OP Units exchange or other disposition of
remaining general partner if, in that materially and adversely any assets of the AIMCO Operating
the opinion of counsel to your affects the rights or preferences Partnership (including, but not
partnership, such election would of the holders of the Preferred OP limited to, the exercise or grant
not jeopardize your partnership's Units. The creation or issuance of of any conversion, option,
status as a partnership for tax any class or series of partnership privilege or subscription right or
purposes. If no general partner units, including, without any other right available in
remains, your partnership may limitation, any partnership units connection with any assets at any
continue if, within ninety days of that may have rights senior or time held by the AIMCO Operating
the retirement, the limited superior to the Preferred OP Units, Partnership) or the merger,
partners holding more than 50% of shall not be deemed to materially consolidation, reorganization or
the units elect a substitute adversely affect the rights or other combination of the AIMCO
general partner who is willing to preferences of the holders of Operating Partnership with or into
continue your partnership. Preferred OP Units. With respect to another en-
the exercise of the above de-
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
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scribed voting rights, each tity, all without the consent of
Preferred OP Units shall have one the OP Unitholders.
(1) vote per Preferred OP Unit.
The general partner may cause the
dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
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Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to
distributions
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
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accumulated, accrued and unpaid on take such reasonable efforts, as
the Preferred OP Units and such determined by it in its sole and
Parity Units. Unless full absolute discretion and consistent
cumulative distributions on the with AIMCO's qualification as a
Preferred OP Units have been de- REIT, to cause the AIMCO Operating
clared and paid, except in limited Partnership to distribute
circumstances, no distributions may sufficient amounts to enable the
be declared or paid or set apart general partner to transfer funds
for payment by the AIMCO Operating to AIMCO and enable AIMCO to pay
Partnership and no other stockholder dividends that will (i)
distribution of cash or other prop- satisfy the requirements for
erty may be declared or made, qualifying as a REIT under the Code
directly or indirectly, by the and the Treasury Regulations and
AIMCO Operating Partnership with (ii) avoid any Federal income or
respect to any Junior Units, nor excise tax liability of AIMCO. See
shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
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A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fractional unit and on any securities exchange. The transferability of the OP Units.
if such assignment is less than all Preferred OP Units are subject to Until the expiration of one year
of the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
five units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignments taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any person, subject to
your partnership for Federal tax ferred OP Units to any transferee the satisfaction of certain
purposes and the transferor re- without the consent of the general conditions specified in the AIMCO
ceives a ruling from the IRS to partner, which consent may be Operating Partnership Agreement,
such effect and (4) the assignor withheld in its sole and absolute including the general partner's
and assignee have complied with discretion. After the expiration of right of first refusal. See
such other conditions as determined one year, such holders of Preferred "Description of OP Units --
by the general partner to comply OP Units has the right to transfer Transfers and Withdrawals" in the
with any state securities all or any portion of its Preferred accompanying Prospectus.
regulatory authority. Such OP Units to any person, subject to
transferee may be substituted as a the satisfaction of certain After the first anniversary of
limited partner if: (1) the general conditions specified in the AIMCO becoming a holder of Common OP
partner consents in writing, which Operating Partnership Agreement, Units, an OP Unitholder has the
consent may be granted or denied in including the general partner's right, subject to the terms and
the sole discretion of the general right of first refusal. conditions of the AIMCO Operating
partner, (2) the transferor elects Partnership Agreement, to require
to become a substitute limited After a one-year holding period, a the AIMCO Operating Partnership to
partner by delivering to the holder may redeem Preferred OP redeem all or a portion of the
general partner a written notice, Units and receive in exchange Common OP Units held by such party
executed and acknowledged by the therefor, at the AIMCO Operating in exchange for a cash amount based
assignor and assignee of such Partnership's option, (i) subject on the value of shares of Class A
election, (3) the assignee executes to the terms of any Senior Units, Common Stock. See "Description of
and acknowledges such other cash in an amount equal to the OP Units -- Redemption Rights" in
instruments that the general Liquidation Preference of the the accompanying Prospectus. Upon
partner may require including an Preferred OP Units tendered for receipt of a notice of redemption,
adoption of your partnership's redemption, (ii) a number of shares the AIMCO Operating Partnership
agreement of limited partnership, of Class I Cumulative Preferred may, in its sole and absolute
and (4) the assignee pays the Stock of AIMCO that pay an discretion but subject to the
partnership for its expenses aggregate amount of dividends yield restrictions on the owner-
incurred in the transaction.
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
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equivalent to the distributions on ship of Class A Common Stock
the Preferred OP Units tendered for imposed under AIMCO's charter and
redemption and are part of a class the transfer restrictions and other
or series of preferred stock that limitations thereof, elect to cause
is then listed on the New York AIMCO to acquire some or all of the
Stock Exchange or another national tendered Common OP Units in
securities exchange, or (iii) a exchange for Class A Common Stock,
number of shares of Class A Common based on an exchange ratio of one
Stock of AIMCO that is equal in share of Class A Common Stock for
Value to the Liquidation Preference each Common OP Unit, subject to
of the Preferred OP Units tendered adjustment as provided in the AIMCO
for redemption. The Preferred OP Operating Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 1087
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 1088
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 1089
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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<PAGE> 1093
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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<PAGE> 1094
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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<PAGE> 1095
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee equal to 7.5% of the Net
Cash from Operations for each year for its services as general partner of your
partnership so long as the limited partners receive 5% per annum on their
capital investment and may also receive reimbursement for expenses incurred in
such capacity. The general partner received partnership management fees and
reimbursements totaling $148,000 in 1996, $145,000 in 1997 and $65,000 for the
first six months of 1998. The property manager received management fees of
$346,000 in 1996, $352,000 in 1997 and $184,000 for the first six months of
1998. The AIMCO Operating Partnership has no current intention of changing the
fee structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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<PAGE> 1096
YOUR PARTNERSHIP
GENERAL
Angeles Partners XI was organized on February 14, 1983, under the laws of
the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following properties: Fox Run I
and II Apartments, a 776-unit complex in Plainsboro, New Jersey. Your
partnership also has a 41.1% investment in the Princeton Meadows Golf Course
Joint Venture in Plainsboro, New Jersey. The general partner of your partnership
is Angeles Realty Corporation II, which is a majority-owned subsidiary of AIMCO.
Insignia Residential Group, L.P., which is a majority-owned subsidiary of AIMCO,
serves as manager of the properties owned by your partnership. As of September
15, 1998, there were 80 units of limited partnership interest issued and
outstanding, which were held of record by 3,988 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101. For additional information about your partnership,
please refer to the annual and quarterly reports prepared by your partnership
which accompany this Prospectus Supplement.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
TERM OF THE PARTNERSHIP
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2035, unless sooner terminated as
provided in the agreement or by law. Limited partners could, as an alternative
to tendering their units, take a variety of possible actions, including voting
to liquidate the partnership or amending the agreement of limited partnership to
authorize limited partners to cause the partnership to merge with another entity
or engage in a "roll-up" or similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all
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<PAGE> 1097
considered. Any of these factors, and possibly others, could potentially
contribute to any decision by the general partner to sell, refinance, upgrade
with capital improvements or hold a particular partnership property. Based on
the above considerations, the general partner has determined that it is not in
the best interests of limited partners to sell or refinance any property at the
present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In the event that a claim for indemnification against liabilities
arising under the Securities Act of 1933, as amended (other than for the payment
by your partnership of expenses incurred or paid by the general partner in the
successful defense of any action, suit or proceeding) is asserted by the general
partner in connection with the units, your partnership will, unless in the
opinion of its counsel, the matter is settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended and will agree to be governed by the court's final
adjudication of such issue.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
DISTRIBUTIONS
The following table sets forth the distributions per unit in the periods
indicated below. The original cost per unit was $1,000.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 0.00
January 1, 1996 - December 31, 1996......................... 0.61
January 1, 1997 - December 31, 1997......................... 0.00
January 1, 1998 - June 30, 1998............................. 0.00
</TABLE>
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<PAGE> 1098
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 0.2% interest in your partnership, including 80 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $198,631
1995........................................................ 154,159
1996........................................................ 148,000
1997........................................................ 145,000
1998 (through June 30)...................................... 65,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $506,180
1995........................................................ 368,605
1996........................................................ 346,000
1997........................................................ 352,000
1998 (through June 30)...................................... 184,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
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<PAGE> 1099
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Partners XI appearing in
Angeles Partners XI Annual Report (Form 10-KSB) for the year ended December 31,
1997, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
S-80
<PAGE> 1100
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 1101
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1102
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 1103
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1104
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1105
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1106
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1107
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1108
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1109
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES PARTNERS XII
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, an affiliate of
your general partner estimated the net asset value of your units to be
$948.00 per unit and a separate affiliate estimated the net liquidation
value of your units to be $911.06 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in nine apartment properties, one commercial
complex and a joint venture owning a golf course to holding an interest
in our large portfolio of properties. In the future, the properties owned
by your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1110
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Partners XII............................... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-56
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-65
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
</TABLE>
i
<PAGE> 1111
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-79
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-82
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1112
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Partners XII. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1113
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1114
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership has not paid any distributions in the last three fiscal
years. We will pay fixed quarterly distributions of $ per
unit on the Tax-Deferral % Preferred OP Units before any distributions
are paid to holders of Tax-Deferral Common OP Units. We pay quarterly
distributions on the Tax-Deferral Common OP Units based on our funds from
operations for that quarter. For the six months ended June 30, 1998, we
paid distributions of $1.125 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). This is equivalent to
distributions of $ per year on the number of Tax-Deferral %
Preferred OP Units, or $ per year on the number of Tax-Deferral Common
OP Units, that you would receive in an exchange for each of your
partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in nine apartment properties, one
commercial complex and a joint venture owning a golf course to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1115
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $30.00 per unit to $535.00 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, an
affiliate of your general partner estimated the net asset value of your
units to be $948.00 per unit and a separate affiliate of your general
partner estimated the net liquidation value of your units to be $911.06 per
unit. However, we do not believe that these valuations represent the
current fair market value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 1116
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that, if you do not tender all of
your units, you continue to hold a minimum of five units subsequent to any
transfer, except in limited circumstances. You may tender fractional units
only if you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 1117
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 1118
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 1119
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, an affiliate of your general partner estimated the net asset value of your
units to be $948.00 per unit and a separate affiliate of your general partner
estimated the net liquidation value of your units to be $911.06 per unit.
However, we do not believe that these valuations represent the current fair
market value of your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $30.00 per unit to $535.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
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deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages nine
apartment properties and one commercial complex and has a minority interest in a
joint venture owning a golf course to an interest in a partnership that invests
in and manages a large portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence
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on matters affecting the operation of the AIMCO Operating Partnership and third
parties may find it difficult to attempt to gain control or influence the
activities of our operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although
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these agreements provide us with some protection against rising interest rates,
these agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
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POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
22.2% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of
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your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 1128
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $30.00 to $535.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 1129
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to 7.5% of the Net Cash from Operations for each
year for its services as general partner of your partnership so long as the
limited partners receive 5% per annum on their capital investment and may also
receive reimbursement for expenses incurred in such capacity. The general
partner of your partnership received total fees and reimbursements of $219,000
for the first six months of 1998. The property manager received management fees
of $515,000 for the first six months of 1998. We have no current intention of
changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Partners XII was organized on May 26, 1983, under the laws of the
State of California. Its primary business is real estate ownership and related
operations. Your partnership was formed for the purpose of making investments in
various types of real properties which offer potential capital appreciation and
cash
S-18
<PAGE> 1130
distributions to its limited partners. Your partnership's investment
portfolio currently consists of the following nine residential apartment
complexes, one commercial complex and a real estate joint venture: Briarwood
Apartments, a 73-unit complex in Cedar Rapids, Iowa; Chambers Ridge Apartments,
a 324-unit complex in Harrisburg, Pennsylvania; Gateway Gardens Apartments, a
328-unit complex in Cedar Rapids, Iowa; Hunters Glen Apartments-IV, a 264-unit
complex in Plainsboro, New Jersey; Hunters Glen Apartments-V, a 304-unit complex
in Plainsboro, New Jersey; Hunters Glen Apartments-VI, a 328-unit complex in
Plainsboro, New Jersey; Pickwick Place Apartments, a 336-unit complex in
Indianapolis, Indiana; Southpointe Apartments, a 499-unit complex in Bedford
Heights, Ohio; Twin Lake Towers Apartments, a 399-unit complex in Westmont,
Illinois; Cooper Point Plaza, a 103,473 square-foot retail center in Olympia,
Washington; and a 44.5% interest in Princeton Golf Course Joint Venture, which
owns Princeton Meadows Golf Course in Princeton, New Jersey. The general partner
of your partnership is Angeles Realty Corporation II, which is a majority-owned
subsidiary of AIMCO. Insignia Residential Group, L.P., which is a majority-owned
subsidiary of AIMCO, serves as manager of the properties owned by your
partnership. As of September 15, 1998, there were 44,718 units of limited
partnership interest issued and outstanding, which were held of record by 3,971
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1131
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1132
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) @
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1133
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1134
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1135
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1136
SUMMARY FINANCIAL INFORMATION OF ANGELES PARTNERS XII
The summary financial information of Angeles Partners XII for the six
months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Angeles Partners XII for the years ended December 31, 1997, 1996
and 1995 based on audited financial statements. This information should be read
in conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein.
ANGELES PARTNERS XII
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $ 10,870 $ 10,457 $ 21,291 $ 21,321 $ 20,935
Net Income (Loss)........................................... (516) (1,106) (2,025) (1,802) (1,496)
Net Income (Loss) per limited partnership unit.............. (11.43) (24.49) (44.83) (39.85) (33.09)
Distributions per limited partnership unit.................. -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $ 38,275 $ 41,510 $ 39,990 $ 43,354 $ 46,539
Total Assets................................................ 49,923 52,150 51,365 53,430 55,882
Notes Payable............................................... 71,736 72,425 72,105 72,756 73,372
Partners' Capital (Deficit)................................. (25,131) (23,696) (24,615) (22,590) (20,788)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING
PARTNERSHIP ANGELES PARTNERS XII
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $0.00
</TABLE>
S-25
<PAGE> 1137
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $30.00 per unit to
$535.00 per unit from January 1, 1997 to September 30, 1998. As of June 30,
1998, an affiliate of your general partner estimated the net asset value of your
units to be $948.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $911.06 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 1138
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 1139
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages nine apartment properties and one
commercial complex and has a minority interest in a joint venture owning a golf
course. In contrast, the AIMCO Operating Partnership is in the business of
acquiring, marketing, managing and operating a large portfolio of apartment
properties. While diversification of assets may reduce certain risks of
investment attributable to a single property or entity, there can be no
assurance as to the value or performance of our securities or our portfolio of
properties as compared to the value of your units or your partnership. Proceeds
of future asset sales or refinancings by the AIMCO Operating Partnership
generally will be reinvested rather than distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ , and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. There
have been no distributions with respect to your units in the past three fiscal
years. Therefore, distributions with respect to the Preferred OP Units and
Common OP Units that we are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison of
Ownership of Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
S-28
<PAGE> 1140
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
properties owned by your partnership. Through subsidiaries, AIMCO currently
owns, in the aggregate, approximately a 22.2% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia
S-29
<PAGE> 1141
(the "Insignia Partnerships"). Such offers would provide liquidity for the
limited partners of the Insignia Partnerships. Such offers would also allow the
AIMCO Operating Partnership an opportunity to increase its ownership interest in
certain Insignia Partnerships which would provide a larger asset and capital
base and increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In April, 1998, Broad River Properties,
L.L.C., then an affiliate of Insignia and now our affiliate, commenced a tender
offer pursuant to which it acquired 8,002 units (representing approximately
17.9% of the number outstanding) at a cash purchase price of $500.00 per unit on
May 20, 1998.
In August, 1998, Cooper River Properties, L.L.C., then an affiliate of
Insignia and now our affiliate, together with Insignia Properties, L.P.,
Insignia Properties Trust, and Insignia Financial Group, Inc., commenced a
tender offer for $600.00 per unit and purchased shares in ,
1998.
In August, 1998, Madison Partnership Liquidity Investors 64, LLC, which was
unaffiliated with Insignia and is not affiliated with AIMCO, commenced a tender
offer for $360.00 per unit and purchased shares in , 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
S-30
<PAGE> 1142
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that, if
you do not tender all of your units, you continue to hold a minimum of five
units subsequent to any transfer, except in limited circumstances. You may
tender fractional units only if you are tendering all of your units. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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<PAGE> 1147
Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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<PAGE> 1149
pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal income tax purposes. This provision may limit sales of units in the
secondary market and in private transactions for the twelve-month period
following completion of this offer. The general partner of your partnership has
advised the AIMCO Operating Partnership that it will not process any requests
for recognition of substitution of limited partners upon a transfer of units
during such twelve-month period which the general partner believes may cause a
tax termination in contravention of the agreement of limited partnership. The
AIMCO Operating Partnership took this restriction into account in determining
the maximum number of units for which this offer is made. Based on the general
partner's records, approximately 1,259 units in your partnership have been
transferred during the twelve months ended December 31, 1997 (representing
approximately 2.82% of the outstanding units). As a result, the AIMCO Operating
Partnership does not believe that this restriction will preclude it from
acquiring the maximum number of units for which this offer is made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint has been filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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<PAGE> 1159
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
- -------- ---------------- -------------- --------------
<S> <C> <C> <C>
Briarwood Apartments.................. $ % $
Chambers Ridge Apartments.............
Cooper Point Plaza....................
Gateway Gardens Apartments............
Hunters Glen Apartments-IV............
Hunters Glen Apartments-V.............
Hunters Glen Apartments-VI............
Pickwick Plaza Apartments.............
Southpointe Apartments................
Twin Lake Towers Apartments...........
Princeton Meadows Golf Course (44.5%
in interest)........................
</TABLE>
S-48
<PAGE> 1160
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
S-49
<PAGE> 1161
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ , and current annualized distributions with respect to
the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange
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<PAGE> 1162
for each of your partnership's units. There have been no distributions with
respect to your units in the past three fiscal years. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are expected to be , immediately following our offer, than the
distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
partner of your partnership and the AIMCO Operating Partnership believe that the
valuation method described in "Valuation of Units" provides a meaningful
indication of value for residential apartment properties although there are
other ways to value real estate. A liquidation in the future might generate a
higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions
S-51
<PAGE> 1163
analyzed by it in arriving at the estimates of value would exist at the
time of the offer. The assumptions used have been determined by the general
partner of your partnership in good faith, and, where appropriate, are based
upon current and historical information regarding your partnership and current
real estate markets, and have been highlighted below to the extent critical to
the conclusions of the general partner of your partnership. The estimated values
in the following chart are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Actual results may vary
from those set forth below based on numerous factors, including interest rate
fluctuations, tax law changes, supply and demand for similar apartment
properties, the manner in which your partnership's property is sold and changes
in availability of capital to finance acquisitions of apartment properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $30.00 to $535.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 12,102 units (representing less than 27.07%
of the total outstanding units) was transferred in sale transactions. Set forth
in the table below are the high and low sales prices of units for the quarterly
periods from January 1, 1996 to September 30, 1998, as reported by the general
partner and by The Partnership Spectrum, which is an independent, third-party
source. The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported prices; thus the AIMCO Operating
Partnership does not know whether the information compiled by The Partnership
Spectrum is accurate or complete. The transfer paperwork submitted to the
general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
ANGELES PARTNERS XII
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $175.00 $535.00 (c) (c)
Second Quarter.................................. 175.00 450.00 380.00 450.00
First Quarter................................... 30.00 403.12 340.00 425.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 110.00 410.00 368.00 379.00
Third Quarter................................... 65.10 406.10 365.00 406.00
Second Quarter.................................. 125.00 421.00 360.00 406.00
First Quarter................................... 35.00 420.00 350.00 425.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 125.00 450.00 360.00 410.00
Third Quarter................................... 65.00 397.17 337.00 396.00
Second Quarter.................................. 110.00 395.95 -- --
First Quarter................................... 110.00 392.00 -- --
</TABLE>
S-52
<PAGE> 1164
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Southpointe Apartments was appraised in September, 1995 by an
independent, third party appraiser, Koeppel Tener Real Estate Services, Inc.
(the "Appraiser"), in connection with a refinancing of the property. According
to the appraisal report, the scope of the appraisal included an inspection of
the property and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice,
S-53
<PAGE> 1165
and in compliance with the Appraisal Standards set forth in the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (known as "FIRREA").
The estimated market value of the fee simple estate of the property specified in
that appraisal report was $9,750,000. A copy of the summary of the appraisal has
been filed as an exhibit to the AIMCO Operating Partnership's Tender Offer
Statement on Schedule 14D-1 filed with the SEC. Independent appraisals have not
been conducted for any of the partnership's other properties in the past three
years.
General Partner's Annual Estimates of Net Asset Value. An affiliate of your
general partner prepared an estimate of your partnership's net asset value per
unit in connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in August, 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $948.00. Your
general partner also prepares annual estimates of your partnership's net asset
value per unit. Your general partner's three most recent estimates of your
partnership's net asset value per unit were $825.00, $582.00 and $613.00 as of
December 31, 1997, 1996 and 1995, respectively. Your general partner estimates
net asset value based on a hypothetical sale of the partnership's properties and
the distribution to the limited partners and the general partners of the gross
proceeds of such sales, net of related indebtedness, together with the cash,
proceeds from temporary investments, and all other assets that are believed to
have liquidation value, after provision in full for all of the other known
liabilities of your partnership and the golf course joint venture. This net
asset value does not take into account (i) timing considerations or (ii) costs
associated with winding up the partnership and the golf course joint venture.
Therefore, the AIMCO Operating Partnership believes that this estimate of net
asset value per unit does not necessarily represent either the fair market value
of a unit or the amount a limited partner reasonably could expect to receive if
the partnership's properties were sold and the partnership was liquidated. For
this reason, the AIMCO Operating Partnership considered this net asset value
estimate to be less meaningful in determining the offer consideration than the
analysis described above under "Valuation of Units."
Estimate of Net Asset Value in Connection with the MAE GP Merger. In
connection with the March 7, 1998 merger of MAE GP Corporation into IPT, IPT
estimated the net asset value of a unit (as of December 31, 1997) to be $766.00.
This net asset value estimate was based on a hypothetical sale of all of your
partnership's properties and the distribution to the limited partners and the
general partners of the gross proceeds of such sales, net of related
indebtedness, together with the partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the partnership's and the golf course joint
venture's other known liabilities. This net asset value estimate did not take
into account (i) timing considerations or (ii) costs associated with winding up
your partnership and the golf course joint venture. Therefore, the AIMCO
Operating Partnership believes that this estimate of the net asset value of a
unit does not necessarily represent either the fair market value of a unit or
the amount a limited partner reasonably could expect to receive if the
partnership's properties were sold and the partnership was liquidated. For this
reason, the AIMCO Operating Partnership considered this net asset value estimate
to be less meaningful in determining the offer consideration than the analysis
described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
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<PAGE> 1166
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
S-55
<PAGE> 1167
similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
S-56
<PAGE> 1168
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
S-57
<PAGE> 1169
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-58
<PAGE> 1170
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests in conduct any business that may be lawfully conducted by
residential, commercial and industrial real properties, a limited partnership organized pursuant to the
either directly or indirectly including through Delaware Revised Uniform Limited Partnership Act (as
investments in partnerships or joint ventures with amended from time to time, or any successor to such
others. Subject to restrictions contained in your statute) (the "Delaware Limited Partnership Act"),
partnership's agreement of limited partnership, your provided that such business is to be conducted in a
partnership may perform all acts necessary, advisable manner that permits AIMCO to be qualified as a REIT,
or convenient to the business of your partnership unless AIMCO ceases to qualify as a REIT. The AIMCO
including borrowing money and creating liens. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 1171
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner may make offerings of units upon such contributions as may be established by the general
terms and conditions and in such amounts as the general partner in its sole discretion. The net capital
partner in its sole discretion deems reasonable, so contribution need not be equal for all OP Unitholders.
long as such terms and conditions are no more favorable No action or consent by the OP Unitholders is required
than those offered to the limited partners who in connection with the admission of any additional OP
purchased their units under the terms and conditions of Unitholder. See "Description of OP Units -- Management
the first offering. The capital contribution need not by the AIMCO GP" in the accompanying Prospectus.
be equal for all limited partners and no action or Subject to Delaware law, any additional partnership
consent is required in connection with the admission of interests may be issued in one or more classes, or one
any additional limited partners. Your partnership may or more series of any of such classes, with such
not issue units in exchange for property. designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. The general partner may entities in which it is or thereby becomes a
not purchase or lease any real property or any loan or participant upon such terms and subject to such
lease from your partnership or sell or lease any real conditions consistent with the AIMCO Operating Part-
property or any loan or lease to your partnership nership Agreement and applicable law as the general
either directly or through an affiliate. However, the partner, in its sole and absolute discretion, believes
general partner or an affiliate may purchase property to be advisable. Except as expressly permitted by the
in its own name and temporarily hold title thereto for AIMCO Operating Partnership Agreement, neither the
the purpose of facilitating its acquisition or general partner nor any of its affiliates may sell,
financing by your partnership if (1) the property is transfer or convey any property to the AIMCO Operating
purchased by your partnership for a price no greater Partnership, directly or indirectly, except pursuant to
than the cost of the property to the general partner or transactions that are determined by the general partner
its affiliate, (2) no difference exists in the interest in good faith to be fair and reasonable.
rates of the loans secured by the property at the time
acquired by the general partner or its affiliates and
at the time acquired by your partnership and (3)
neither the general partner nor its affiliates receive
any economic advantage by reason of holding or having
held title to the property. Your partnership may not
make loans to the general partner or its affiliates but
the general partner may lend money to your partnership
if such loan is made at interest rates and charges not
in excess of the rates and charges which would be
charged by unrelated banks in a competitive position or
in any event in excess of the prime interest rate which
is charged from time to time by Bank of America
National Trust and Savings Association, Los Angeles,
California, on ninety-day unsecured loans to
responsible and substantial borrowers. Unless certain
conditions are met, the general partner may not make a
permanent loan to your partnership nor may your
partnership finance the purchase of your partnership's
property by use of a "wraparound" or "all-inclusive"
note and mortgage or deed of trust under which the
general partner or any of its
</TABLE>
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<PAGE> 1172
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
affiliates are the obligee or secured party. Your
partnership may not grant to the general partner or its
affiliates an exclusive right or an exclusive
employment to sell your partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money to secure such debt by mortgage, pledge restrictions on borrowings, and the general partner has
or other lien on any of the assets of your partnership. full power and authority to borrow money on behalf of
The general partner of your partnership may not, in the AIMCO Operating Partnership. The AIMCO Operating
connection with the acquisition of assets, subject any Partnership has credit agreements that restrict, among
asset of your partnership to one or more mortgages, other things, its ability to incur indebtedness. See
deeds of trust or other security interest, so that the "Risk Factors -- Risks of Significant Indebtedness" in
aggregate amount of indebtedness secured by mortgages, the accompanying Prospectus.
deeds of trust and other security interests to which
all partnership assets are subject, immediately after
such action, is greater than 80% of the aggregate
amount of the purchase price of all assets. Your
partnership may not issue debt securities to the
public. The general partner may not acquire any real
property which, at the date of the acquisition, is
subject to indebtedness secured by a mortgage, deed of
trust or other security interest on the real property
having an unpaid principal balance immediately after
the acquisition equal to less than 40% of the purchase
price of the real property paid by your partnership. No
creditor who makes a non-recourse loan to your
partnership will have or acquire at any time, as a
result of making such loan, any direct or indirect
interest in the profits, capital or property of your
partnership, other than as a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, the general partner has the management power over the business and affairs of the
right, power and authority, on behalf of your AIMCO Operating Partnership. The OP Unitholders have
partnership, and in its name, to exercise all of the the right to vote on certain matters described under
rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without limited partners under California Units -- Voting Rights" below. The general partner may
law. Limited partners have no right to participate in not be removed by the OP Unitholders with or without
the management or conduct of your partnership's cause.
business or affairs nor any power or authority to act
for or on behalf of your partnership in any respect In addition to the powers granted a general partner of
whatsoever. a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur
</TABLE>
S-61
<PAGE> 1173
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
debt or enter into other similar credit, guarantee,
financing or refinancing arrangements for any purpose
upon such terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. In the event that a claim for indemnification settlements and other amounts incurred in connection
against liabilities arising under the Securities Act of with any actions relating to the operations of the
1933, as amended (other than for the payment by your AIMCO Operating Partnership, as set forth in the AIMCO
partnership of expenses incurred or paid by the general Operating Partnership Agreement. The Delaware Limited
partner in the successful defense of any action, suit Partnership Act provides that subject to the standards
or proceeding) is asserted by the general partner in and restrictions, if any, set forth in its partnership
connection with the units, your partnership will, agreement, a limited partnership may, and shall have
unless in the opinion of its counsel, the matter is the power to, indemnify and hold harmless any partner
settled by controlling precedent, submit to a court of or other person from and against any and all claims and
appropriate jurisdiction the question of whether such demands whatsoever. It is the position of the
indemnification by it is against public policy as Securities and Exchange Commission that indemnification
expressed in the Securities Act of 1933, as amended and of directors and officers for liabilities arising under
will agree to be governed by the court's final the Securities Act is against public policy and is
adjudication of such issue. unenforceable pursuant to Section 14 of the Securities
Act of 1933.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner, the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership and such other conditions as are controlling interest in the AIMCO Operating Partner-
set forth in your partnership's agreement of limited ship. Additionally, the AIMCO Operating Partnership
partnership is satisfied. The general partner may admit Agreement contains restrictions on the ability of OP
additional general partners without the consent of the Unitholders to transfer their OP Units. See
limited partners. No limited partner may substitute a "Description of OP Units -- Transfers and Withdrawals"
transferee of his units in such limited partner's place in the accompanying Prospectus.
without the consent of the general partner which may be
withheld at the sole discretion of the general partner.
</TABLE>
S-62
<PAGE> 1174
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership, (3) deletes or adds any provision required the OP Unitholders. The general partner will seek the
by any applicable law, (4) reflects any reduction of written consent of the OP Unitholders on the proposed
the partners' capital accounts or (5) reflects a change amendment or will call a meeting to vote thereon. See
in the name or the location of the principal place of "Description of OP Units -- Amendment of the AIMCO
business of your partnership. Your partnership's agree- Operating Partnership Agreement" in the accompanying
ment of limited partnership may not be amended to Prospectus.
change your partnership to a general partnership,
extend the term of your partnership, allow the
expulsion of the non-managing general partner without
the simultaneous expulsion of the managing general
partner or change the liability of the general partner
or the limited partners. Any amendment which diminishes
the rights of the general partner may not be made
without the consent of the general partner or all of
the limited partners. All other amendments to your
partnership's agreement of limited partnership must be
approved by the limited partners owning more than 50%
of the units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership receives an The general partner does not receive compensation for
annual management fee equal to 7.5% of the Net Cash its services as general partner of the AIMCO Operating
from Operations for each year for its services as Partnership. However, the general partner is entitled
general partner of your partnership so long as the to payments, allocations and distributions in its
limited partners receive 5% per annum on their capital capacity as general partner of the AIMCO Operating
investment and may also receive reimbursement for Partnership. In addition, the AIMCO Operating Part-
expenses incurred in such capacity. nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
S-63
<PAGE> 1175
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for the negligence, no OP Unitholder has personal liability for
debts, liabilities or obligations of your partnership the AIMCO Operating Partnership's debts and
in excess of its capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner may delegate any or all of its powers, rights Operating Partnership Agreement expressly limits the
and obligations under your partnership's agreement of liability of the general partner by providing that the
limited partners and in furtherance of any such general partner, and its officers and directors will
delegation may appoint, employ or contract with any not be liable or accountable in damages to the AIMCO
person for the account of your partnership for the Operating Partnership, the limited partners or
transaction of the business of your partnership, which assignees for errors in judgment or mistakes of fact or
person may, under the supervision of the general law or of any act or omission if the general partner or
partner, perform such acts or services for your such director or officer acted in good faith. See
partnership as the general partnership may approve. The "Description of OP Units -- Fiduciary Responsibilities"
general partner and its affiliates may acquire real in the accompanying Prospectus.
properties for their own account, or engage in the
acquisition, development, operation or management of
real estate on behalf of other entities, including
business ventures similar to, related to or in direct
or indirect competition with any business of your
partnership. Neither your partnership nor any other
partner will have any right in or to such other
business ventures or the income or profits derived
therefrom.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
</TABLE>
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<PAGE> 1176
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners Units will have the same such as certain amend-
</TABLE>
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<PAGE> 1177
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
may amend your partnership's voting rights as holders of the ments and termination of the AIMCO
agreement of limited partnership, Common OP Units. See "Description Operating Partnership Agreement and
subject to certain exceptions; of OP Units" in the accompanying certain transactions such as the
terminate your partnership; remove Prospectus. So long as any institution of bankruptcy
a general partner; approve the Preferred OP Units are outstand- proceedings, an assignment for the
admission of a substituted general ing, in addition to any other vote benefit of creditors and certain
partner and approve or disapprove or consent of partners required by transfers by the general partner of
the single sale or a series of law or by the AIMCO Operating its interest in the AIMCO Operating
sales which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership. holders of at least 50% of the
outstanding Preferred OP Units will Under the AIMCO Operating Partner-
A general partner may cause the be necessary for effecting any ship Agreement, the general partner
dissolution of your partnership by amendment of any of the provisions has the power to effect the
retiring. In such event, your of the Partnership Unit Desig- acquisition, sale, transfer,
partnership may be continued by the nation of the Preferred OP Units exchange or other disposition of
remaining general partner if, in that materially and adversely any assets of the AIMCO Operating
the opinion of counsel to your affects the rights or preferences Partnership (including, but not
partnership, such election would of the holders of the Preferred OP limited to, the exercise or grant
not jeopardize your partnership's Units. The creation or issuance of of any conversion, option,
status as a partnership for tax any class or series of partnership privilege or subscription right or
purposes. If no general partner units, including, without any other right available in
remains, your partnership may limitation, any partnership units connection with any assets at any
continue if, within ninety days of that may have rights senior or time held by the AIMCO Operating
the retirement, the limited superior to the Preferred OP Units, Partnership) or the merger,
partners holding more than 50% of shall not be deemed to materially consolidation, reorganization or
the units elect a substitute adversely affect the rights or other combination of the AIMCO
general partner who is willing to preferences of the holders of Operating Partnership with or into
continue your partnership. Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to during such quarter to the general
fixed in amount and depend upon the partner,
</TABLE>
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<PAGE> 1178
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
operating results and net sales or the lower of (i) % plus the the special limited partner and the
refinancing proceeds available from annual interest rate then holders of Common OP Units on the
the disposition of your applicable to U.S. Treasury notes record date established by the
partnership's assets. with a maturity of five years, and general partner with respect to
(ii) the annual dividend rate on such quarter, in accordance with
the most recently issued AIMCO their respective interests in the
non-convertible preferred stock AIMCO Operating Partnership on such
which ranks on a parity with its record date. Holders of any other
Class H Cumulative Preferred Stock. Preferred OP Units issued in the
Such distributions will be future may have priority over the
cumulative from the date of origi- general partner, the special
nal issue. Holders of Preferred OP limited partner and holders of
Units will not be entitled to Common OP Units with respect to
receive any distributions in excess distributions of Available Cash,
of cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred is not with Preferred OP Units are not listed nership Agreement restricts the
respect to any fractional unit and on any securities exchange. The transferability of the OP Units.
if such assignment is less than all Preferred OP Units are subject to Until the expiration of one year
of the units held by the assignor, restrictions on transfer as set from the date on which an OP
after the transfer, the assignor forth in the AIMCO Operating Unitholder acquired OP Units,
and assignee each hold at least Partnership Agreement. subject to certain exceptions, such
five units, except in certain OP Unitholder may not transfer all
circumstances, (2) the assignee and Pursuant to the AIMCO Operating or any portion of its OP Units to
the assignor execute, acknowledge Partnership Agreement, until the any transferee without the consent
and deliver to the general partner expiration of one year from the of the general partner, which
a written assignment, (3) the date on which a holder of Preferred consent may be withheld in its sole
transfer, when added to all other OP Units acquired Preferred OP and absolute discretion. After the
assignments taking place in the Units, subject to certain expiration of one year, such OP
preceding 12 months, in the opinion exceptions, such holder of Unitholder has the right to
of counsel to your partnership, Preferred OP Units may not transfer transfer all or any portion of its
does not result in termination of all or any portion of its Pre- OP Units to any
your partnership for Fed-
</TABLE>
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<PAGE> 1179
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
eral tax purposes and the ferred OP Units to any transferee person, subject to the satisfaction
transferor receives a ruling from without the consent of the general of certain conditions specified in
the IRS to such effect and (4) the partner, which consent may be the AIMCO Operating Partnership
assignor and assignee have complied withheld in its sole and absolute Agreement, including the general
with such other conditions as discretion. After the expiration of partner's right of first refusal.
determined by the general partner one year, such holders of Preferred See "Description of OP Units --
to comply with any state securities OP Units has the right to transfer Transfers and Withdrawals" in the
regulatory authority. Such all or any portion of its Preferred accompanying Prospectus.
transferee may be substituted as a OP Units to any person, subject to
limited partner if: (1) the general the satisfaction of certain After the first anniversary of
partner consents in writing, which conditions specified in the AIMCO becoming a holder of Common OP
consent may be granted or denied in Operating Partnership Agreement, Units, an OP Unitholder has the
the sole discretion of the general including the general partner's right, subject to the terms and
partner, (2) the transferor elects right of first refusal. conditions of the AIMCO Operating
to become a substitute limited Partnership Agreement, to require
partner by delivering to the After a one-year holding period, a the AIMCO Operating Partnership to
general partner a written notice, holder may redeem Preferred OP redeem all or a portion of the
executed and acknowledged by the Units and receive in exchange Common OP Units held by such party
assignor and assignee of such therefor, at the AIMCO Operating in exchange for a cash amount based
election, (3) the assignee executes Partnership's option, (i) subject on the value of shares of Class A
and acknowledges such other to the terms of any Senior Units, Common Stock. See "Description of
instruments that the general cash in an amount equal to the OP Units -- Redemption Rights" in
partner may require including an Liquidation Preference of the the accompanying Prospectus. Upon
adoption of your partnership's Preferred OP Units tendered for receipt of a notice of redemption,
agreement of limited partnership, redemption, (ii) a number of shares the AIMCO Operating Partnership
and (4) the assignee pays the of Class I Cumulative Preferred may, in its sole and absolute
partnership for its expenses Stock of AIMCO that pay an discretion but subject to the
incurred in the transaction. aggregate amount of dividends yield restrictions on the ownership of
equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 1180
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 1181
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 1182
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 1183
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee equal to 7.5% of the Net
Cash from Operations for each year for its services as general partner of your
partnership so long as the limited partners receive 5% per annum on their
capital investment and may also receive reimbursement for expenses incurred in
such capacity. The general partner of your partnership received fees and
reimbursements totaling $453,000 in 1996, $431,000 in 1997 and $219,000 for the
first six months of 1998. The property manager received management fees of
$1,033,000 in 1996, $1,029,000 in 1997 and $515,000 for the first six months of
1998. The AIMCO Operating Partnership has no current intention of changing the
fee structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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YOUR PARTNERSHIP
GENERAL
Angeles Partners XII was organized on May 26, 1983, under the laws of the
State of California. Its primary business is real estate ownership and related
operations. Your partnership was formed for the purpose of making investments in
various types of real properties which offer potential capital appreciation and
cash distributions to its limited partners. Your partnership's investment
portfolio currently consists of the following nine residential apartment
complexes, one commercial complex and a real estate joint venture: Briarwood
Apartments, a 73-unit complex in Cedar Rapids, Iowa; Chambers Ridge Apartments,
a 324-unit complex in Harrisburg, Pennsylvania; Gateway Gardens Apartments, a
328-unit complex in Cedar Rapids, Iowa; Hunters Glen Apartments-IV, a 264-unit
complex in Plainsboro, New Jersey; Hunters Glen Apartments-V, a 304-unit complex
in Plainsboro, New Jersey; Hunters Glen Apartments-VI, a 328-unit complex in
Plainsboro, New Jersey; Pickwick Place Apartments, a 336-unit complex in
Indianapolis, Indiana; Southpointe Apartments, a 499-unit complex in Bedford
Heights, Ohio; Twin Lake Towers Apartments, a 399-unit complex in Westmont,
Illinois; Cooper Point Plaza, a 103,473 square-foot retail center in Olympia,
Washington; and a 44.5% interest in Princeton Golf Course Joint Venture, which
owns Princeton Meadows Golf Course in Princeton, New Jersey. The general partner
of your partnership is Angeles Realty Corporation II, which is a majority-owned
subsidiary of AIMCO. The executive officers and directors of the general partner
are the same as those of the AIMCO GP, which are set forth in Appendix B hereto.
Insignia Residential Group, L.P., which is a majority-owned subsidiary of AIMCO,
serves as manager of the properties owned by your partnership. As of September
15, 1998, there were 44,718 units issued and outstanding, which were held of
record by 3,971 limited partners. Your partnership's principal executive offices
are located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222,
and its telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated February 14, 1984, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner had, on average,
begun selling their properties during the fifth or sixth year after the
investments were made and had sold all of their properties after eight years of
ownership. The prospectus further stated, however, that the general partner was
unable to predict how long the partnership would remain invested in the
properties and that the partnership acquired such properties for investment
rather than resale. In any event, according to the prospectus, the general
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partner anticipated that a disposition of the properties would depend on,
among other things, the current real estate and money markets, economic climate
and income tax consequences to the limited partners. Under your partnership's
agreement of limited partnership, the term of the partnership will continue
until December 31, 2035, unless sooner terminated as provided in the agreement
or by law. Limited partners could, as an alternative to tendering their units,
take a variety of possible actions, including voting to liquidate the
partnership or amending the agreement of limited partnership to authorize
limited partners to cause the partnership to merge with another entity or engage
in a "roll-up" or similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest."
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In the event that a claim for indemnification against liabilities
arising under the Securities Act of 1933, as amended (other than for the payment
by your partnership of expenses incurred or paid by the general partner in the
successful defense of any action, suit or proceeding), is asserted by the
general partner in connection with the units, your partnership will, unless in
the opinion of its counsel the matter is settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
S-79
<PAGE> 1191
whether such indemnification by it is against public policy as expressed in
the Securities Act of 1933, as amended, and will agree to be governed by the
court's final adjudication of such issue.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
DISTRIBUTIONS
Your partnership has not paid any distributions in the past three years.
The original cost per unit was $1,000.00.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 22.2% interest in your partnership, including 9,806 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $475,998
1995........................................................ 443,417
1996........................................................ 453,000
1997........................................................ 431,000
1998 (through June 30)...................................... 219,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----------
<S> <C>
1994........................................................ $ 989,076
1995........................................................ 1,031,693
1996........................................................ 1,033,000
1997........................................................ 1,029,000
1998 (through June 30)...................................... 515,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-80
<PAGE> 1192
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-81
<PAGE> 1193
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Partners XII appearing in
Angeles Partners XII's Annual Report (Form 10-KSB) for the year ended December
31, 1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
S-82
<PAGE> 1194
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 1195
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1196
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 1197
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1198
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1199
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1200
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1201
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1202
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1203
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
ANGELES PARTNERS XIV
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of March 31, 1998, your general
partner estimated the net asset value of your units to be $0.00 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in two apartment properties and one commercial
property to holding an interest in our large portfolio of properties. In
the future, the properties owned by your partnership may outperform our
portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1204
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-15
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-17
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Angeles
Partners XIV............................... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-32
Terms of the Offer; Expiration Date.......... S-32
Acceptance for Payment and Payment for
Units...................................... S-32
Procedure for Tendering Units................ S-33
Withdrawal Rights............................ S-36
Extension of Tender Period; Termination;
Amendment.................................. S-36
Proration.................................... S-37
Fractional OP Units.......................... S-37
Future Plans of the AIMCO Operating
Partnership................................ S-37
Voting by the AIMCO Operating Partnership.... S-38
Dissenters' Rights........................... S-38
Conditions of the Offer...................... S-38
Effects of the Offer......................... S-40
Certain Legal Matters........................ S-41
Fees and Expenses............................ S-43
Accounting Treatment......................... S-43
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-44
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-44
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-44
Tax Consequences of Exchanging Units Solely
for Cash................................... S-45
Adjusted Tax Basis........................... S-45
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-46
Passive Activity Losses...................... S-46
Foreign Offerees............................. S-47
VALUATION OF UNITS............................. S-47
FAIRNESS OF THE OFFER.......................... S-48
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-48
Fairness to Unitholders who Tender their
Units...................................... S-49
Fairness to Unitholders who do not Tender
their Units................................ S-50
Comparison of Consideration to Alternative
Consideration.............................. S-50
Allocation of Consideration.................. S-52
STANGER ANALYSIS............................... S-52
Experience of Stanger........................ S-53
Summary of Materials Considered.............. S-53
Summary of Reviews........................... S-54
Conclusions.................................. S-54
Assumptions, Limitations and
Qualifications............................. S-54
Compensation and Material Relationships...... S-56
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-57
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-63
DESCRIPTION OF PREFERRED OP UNITS.............. S-67
General...................................... S-67
Ranking...................................... S-67
Distributions................................ S-67
Allocation................................... S-68
Liquidation Preference....................... S-68
Redemption................................... S-69
Voting Rights................................ S-69
Restrictions on Transfer..................... S-69
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-70
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-72
CONFLICTS OF INTEREST.......................... S-75
Conflicts of Interest with Respect to the
Offer...................................... S-75
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-75
Competition Among Properties................. S-75
Features Discouraging Potential Takeovers.... S-75
Future Exchange Offers....................... S-75
YOUR PARTNERSHIP............................... S-76
General...................................... S-76
</TABLE>
i
<PAGE> 1205
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-76
Originally Anticipated Term of the
Partnership................................ S-76
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-77
Property Management.......................... S-77
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-77
Distributions................................ S-78
Beneficial Ownership of Interests in Your
Partnership................................ S-78
Compensation Paid to the General Partner and
its Affiliates............................. S-78
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-79
LEGAL MATTERS.................................. S-80
EXPERTS........................................ S-80
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1206
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Angeles Partners XIV. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Angeles Realty Corporation
II, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1207
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1208
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership has not paid any distributions for the past three years.
We will pay fixed quarterly distributions of $ per unit on
the Tax-Deferral % Preferred OP Units before any distributions are paid
to holders of Tax-Deferral Common OP Units. We pay quarterly distributions
on the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in two apartment properties and one
commercial property to holding an interest in an operating business that
owns and manages a large portfolio of properties, with risks that do not
exist for your partnership. You should review the risk factors in this
Prospectus Supplement and in the accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1209
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $1.00 per unit to $35.00 per unit
from January 1, 1997 to September 30, 1998. As of March 31, 1998, your
general partner estimated the net asset value of your units to be $0.00 per
unit.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 1210
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that, if you tender less than all
of your units, after the tender you must hold a minimum of five units. You
may tender fractional units only if you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
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SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of March 31,
1998, your general partner estimated the net asset value of your units to be
$0.00 per unit.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $1.00 per unit to $35.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
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<PAGE> 1214
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages two apartment
properties and one commercial property to an interest in a partnership that
invests in and manages a large portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the
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<PAGE> 1215
holders of OP Units. Such securities could have priority over the OP Units as to
cash flow, distributions and liquidation proceeds. The effect of any such
issuance may be to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our
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<PAGE> 1216
investors unless certain financial tests or other criteria are satisfied. In
some cases, our subsidiaries are subject to similar provisions, which may
restrict their ability to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
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<PAGE> 1217
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
0.08% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your partnership
to sell its assets, distribute the net liquidation proceeds to its partners
in accordance with your partnership's agreement of limited partnership, and
then dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes,
at their option. If your partnership were to sell its assets and liquidate,
you and your partners would not need to rely upon capitalization of income
or other valuation methods to estimate the fair market value of your
partnership's assets. Instead, such assets would be valued through
negotiations with prospective purchasers. However, a liquidating sale of
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
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<PAGE> 1218
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership continues to incur recurring operating losses and suffers from
inadequate liquidity. It is in default on non-recourse and unsecured
indebtedness due to nonpayment of interest and principal when due. These
conditions raise substantial doubt about your partnership's ability to
continue as a going concern. In addition, your partnership faces maturity
or balloon payment dates on its mortgage loans and must either obtain
refinancing or sell its property. If your partnership were to continue
operating as presently structured, it could be forced to borrow on terms
that could result in net losses from operations. In addition, continuation
of your partnership without the offer would deny you and your partners the
benefits that your general partner expects to result from the offer. For
example, a partner of your partnership would have no opportunity for
liquidity unless he were to sell his units in a private transaction. Any
such sale would likely be at a very substantial discount from the partner's
pro rata share of the fair market value of your partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
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<PAGE> 1219
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
S-14
<PAGE> 1220
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
S-15
<PAGE> 1221
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
S-16
<PAGE> 1222
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $1.00 to $35.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
S-17
<PAGE> 1223
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives no fees
for its services as general partner but may receive reimbursement for expenses
incurred in such capacity. The general partner of your partnership received
total fees and reimbursements of $76,000 for the first six months of 1998. The
property manager received management fees of $132,000 for the first six months
of 1998. We have no current intention of changing the fee structure for your
property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Angeles Partners XIV was organized on June 29, 1984, under the laws of the
State of California. Its primary business is real estate ownership and related
operations. Your partnership was formed for the purpose of making investments in
various types of real properties which offer potential capital appreciation and
cash distributions to its limited partners. Your partnership's investment
portfolio currently consists of the following two residential apartment
complexes and one commercial property: Waterford Square Apartments, a 487-unit
residential apartment complex in Huntsville, Alabama; Fox Crest Apartments, a
245-unit residential apartment complex in Waukegan, Illinois; and Dayton
Industrial Complex, an approximately 80,000 square-foot industrial complex in
Dayton, Ohio. We plan to sell Dayton Industrial Complex as of October 31, 1998
for forgiveness of debt and reimbursement of legal fees. The general partner of
your partnership is Angeles Realty Corporation II, which is a majority-owned
subsidiary of AIMCO. Insignia
S-18
<PAGE> 1224
Residential Group, L.P., which is a majority-owned subsidiary of AIMCO,
serves as manager of the apartment properties owned by your partnership. As of
December 31, 1997, there were 43,887 units of limited partnership interest
issued and outstanding, which were held of record by 4,408 limited partners.
Your partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone number at
that address is (303) 757-8101. For additional information about your
partnership, please refer to the annual and quarterly reports prepared by your
partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1225
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA) @
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1226
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1227
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1228
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1229
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1230
SUMMARY FINANCIAL INFORMATION OF ANGELES PARTNERS XIV
The summary financial information of Angeles Partners XIV for the six
months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Angeles Partners XIV for the years ended December 31, 1997, 1996
and 1995 is based on audited financial statements. This information should be
read in conjunction with such financial statements, including the notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein.
ANGELES PARTNERS XIV
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
-------------------- --------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues............................................. $ 2,740 $ 2,813 $ 5,642 $ 7,186 $ 8,129
Net Income (Loss).......................................... 6,492 (1,655) (3,974) (4,542) (3,293)
Net Income (Loss) per limited partnership unit............. 146.44 (37.32) (89.62) (101.87) (73.87)
Distributions per limited partnership unit................. -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------- --------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation............... $ 11,882 $ 16,637 $ 15,524 $ 17,113 $ 25,964
Total Assets............................................... 13,699 18,535 17,286 18,661 27,868
Notes Payable.............................................. 34,081 44,028 44,194 43,825 47,442
Partners' Capital (Deficit)................................ (27,015) (31,188) (33,507) (29,533) (24,991)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING
PARTNERSHIP ANGELES PARTNERS XIV
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $0.00
</TABLE>
S-25
<PAGE> 1231
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $1.00 per unit to
$35.00 per unit from January 1, 1997 to September 30, 1998. As of March 31,
1998, your general partner estimated the net asset value of your units to be
$0.00 per unit. We have retained Stanger to conduct an analysis of our offer and
to render an opinion as to the fairness to you of our offer consideration from a
financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. Furthermore, your general partner has no present intention
to liquidate your partnership, and your partnership's agreement of limited
partnership does not require a sale of your partnership's properties by any
particular date.
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect
S-26
<PAGE> 1232
to our offer. These conflicts include the fact that a decision of the
limited partners of your partnership to remove, for any reason, your general
partner or the manager of your partnership's property from its current position
would result in a decrease or elimination of the substantial fees paid to your
general partner or the property manager for services provided to your
partnership. Your general partner makes no recommendation to you as to whether
you should tender your units. Such conflicts of interest in connection with our
offer and our operation's differ from those conflicts of interest that currently
exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages two apartment properties and one
commercial property. In contrast, the AIMCO Operating Partnership is in the
business of acquiring, marketing, managing and operating a large portfolio of
apartment properties. While diversification of assets may reduce certain risks
of investment attributable to a single property or entity, there can be no
assurance as to the value or performance of our securities or our portfolio of
properties as compared
S-27
<PAGE> 1233
to the value of your units or your partnership. Proceeds of future asset
sales or refinancings by the AIMCO Operating Partnership generally will be
reinvested rather than distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ , and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. There
have been no distributions with respect to your units for the past three years.
See "Comparison of Ownership of Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
S-28
<PAGE> 1234
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Residential Group,
L.P., which manages the apartment properties owned by your partnership. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 0.08%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
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Previous Tender Offers
We are aware that tender offers may have been made to acquire units in your
partnership in exchange for cash. We are unaware of the amounts offered, terms,
tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you
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were to sell your units in a private transaction. Any such sale would
likely be at a very substantial discount from your pro rata share of the fair
market value of your partnership's property. Continuation without our offer
would deny you and your partners the benefits of diversification into a company
which has a much larger and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that, if
you tender less than all of your units, after the tender you must hold a minimum
of five units. You may tender fractional units only if you are tendering all of
your units. No alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal income tax purposes. This provision may limit sales of units in the
secondary market and in private transactions for the twelve-month period
following completion of this offer. The general partner of your partnership has
advised the AIMCO Operating Partnership that it will not process any requests
for recognition of substitution of limited partners upon a transfer of units
during such twelve-month period which the general partner believes may cause a
tax termination in contravention of the agreement of limited partnership. The
AIMCO Operating Partnership took this restriction into account in determining
the maximum number of units for which this offer is made. Based on the general
partner's records, approximately 15 units in your partnership have been
transferred during the twelve months ended December 31, 1997 (representing
approximately 0.03% of the outstanding units). As a result, the AIMCO Operating
Partnership does not believe that this restriction will preclude it from
acquiring the maximum number of units for which this offer is made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint has been filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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<PAGE> 1251
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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<PAGE> 1252
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Waterford Square Apartments $ % $
Fox Crest Apartments
Dayton Industrial Complex
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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<PAGE> 1253
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
S-48
<PAGE> 1254
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ , and current annualized distributions with respect to
the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. There have been no distributions with respect to your units in the
past three years. See "Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
partner of your partnership and the AIMCO Operating Partnership believe that the
valuation method described in "Valuation of Units" provides a meaningful
indication of value for residential apartment
S-49
<PAGE> 1255
properties although there are other ways to value real estate. A
liquidation in the future might generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar apartment properties, the manner in which
your partnership's property is sold and changes in availability of capital to
finance acquisitions of apartment properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $1.00 to $35.00
Estimated liquidation proceeds............................ $
</TABLE>
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<PAGE> 1256
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 131 units (representing approximately .29% of
the total outstanding units) was transferred in sale transactions. Set forth in
the table below are the high and low sales prices of units for the quarterly
periods from January 1, 1996 to September 30, 1998, as reported by the general
partner. The transfer paperwork submitted to the general partner often does not
include the requested price information or contains conflicting information as
to the actual sales price. Accordingly, you should not rely upon this
information as being completely accurate.
ANGELES PARTNERS XIV
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER(a)
----------------------
LOW SALES HIGH SALES
PRICE PRICE
PER UNIT PER UNIT
--------- ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter............................................. -- --
Second Quarter............................................ $ 1.00 $ 4.25
First Quarter............................................. 1.00 3.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................................ 35.00 35.00
Third Quarter............................................. -- --
Second Quarter............................................ -- --
First Quarter............................................. 20.00 20.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................................ -- --
Third Quarter............................................. 0.01 0.01
Second Quarter............................................ -- --
First Quarter............................................. 1.00 5.00
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant
S-51
<PAGE> 1257
information regarding the historical revenues and expenses of the business.
The general partner of your partnership estimated the liquidation value of units
using the same direct capitalization method and assumptions as we did in valuing
the units for the cash offer consideration. See "Valuation of Units." The only
significant difference is that the general partner of your partnership assumed
liquidation would involve additional selling expenses of % of the sale
proceeds. The general partner of your partnership believes this is a normal and
customary cost of property sales. The liquidation analysis also assumed that
your partnership's property was sold to an independent third-party buyer at the
current property value and that other balance sheet assets (excluding amortizing
assets) and liabilities of your partnership were sold at their book value, and
that the net proceeds of sale were allocated to your partners in accordance with
your partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuation:
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with your partnership's 1998 First Quarter Report. That estimate of
your partnership's net asset value per unit as of March 31, 1998 was $0.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders.
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<PAGE> 1258
We determined the offer consideration, and Stanger did not, and was not
requested to, make any recommendations as to the form or amount of consideration
to be paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also
S-53
<PAGE> 1259
performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated
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<PAGE> 1260
to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
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<PAGE> 1261
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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<PAGE> 1262
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Net Cash from Operations (as defined in of the AIMCO Operating Partnership's agreement of
your partnership's agreement of limited partnership). limited partnership (the "AIMCO Operating Partnership
The termination date of your partnership is December Agreement") or as provided by law. See "Description of
31, 2035. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire fee, The purpose of the AIMCO Operating Partnership is to
long-term leasehold, equity or other interests in conduct any business that may be lawfully conducted by
residential, commercial and industrial real properties, a limited partnership organized pursuant to the
either directly or indirectly including through Delaware Revised Uniform Limited Partnership Act (as
investments in partnerships or joint ventures with amended from time to time, or any successor to such
others. Subject to restrictions contained in your statute) (the "Delaware Limited Partnership Act"),
partnership's agreement of limited partnership, your provided that such business is to be conducted in a
partnership may perform all acts necessary, advisable manner that permits AIMCO to be qualified as a REIT,
or convenient to the business of your partnership unless AIMCO ceases to qualify as a REIT. The AIMCO
including borrowing money and creating liens. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 1263
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling units for cash to selected persons time to the limited partners and to other persons, and
who fulfill the requirements set forth in your to admit such other persons as additional limited
partnership's agreement of limited partnership. The partners, on terms and conditions and for such capital
general partner may make offerings of units upon such contributions as may be established by the general
terms and conditions and in such amounts as the general partner in its sole discretion. The net capital
partner in its sole discretion deems reasonable, so contribution need not be equal for all OP Unitholders.
long as such terms and conditions are no more favorable No action or consent by the OP Unitholders is required
than those offer to the limited partners who purchased in connection with the admission of any additional OP
their units under the terms and conditions of the first Unitholder. See "Description of OP Units -- Management
offering. The capital contribution need not be equal by the AIMCO GP" in the accompanying Prospectus.
for all limited partners and no action or consent is Subject to Delaware law, any additional partnership
required in connection with the admission of any interests may be issued in one or more classes, or one
additional limited partners. Your partnership may not or more series of any of such classes, with such
issue units in exchange for property. designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your partnership may not enter into any funds or other assets to its subsidiaries or other
insurance or other transactions with the general persons in which it has an equity investment, and such
partner or any of its affiliates, except in connec- persons may borrow funds from the AIMCO Operating
tion with the performance of property management Partnership, on terms and conditions established in the
services, real estate brokerage services, services as sole and absolute discretion of the general partner. To
agent for the sale of units and as otherwise the extent consistent with the business purpose of the
specifically permitted by your partnership's agreement AIMCO Operating Partnership and the permitted
of limited partnership. The terms of any such employ- activities of the general partner, the AIMCO Operating
ment will allow your partnership to terminate such Partnership may transfer assets to joint ventures,
employment, with or without cause, and without penalty limited liability companies, partnerships,
to your partnership, upon no greater than sixty days corporations, business trusts or other business
notice to the employed party. Except in limited entities in which it is or thereby becomes a
circumstances, the general partner may not purchase or participant upon such terms and subject to such
lease any real property or acquire any loan or lease conditions consistent with the AIMCO Operating Part-
from your partnership or sell or lease any real nership Agreement and applicable law as the general
property or any loan or lease to your partnership partner, in its sole and absolute discretion, believes
either directly or through an affiliate. However, the to be advisable. Except as expressly permitted by the
general partner or an affiliate may purchase property AIMCO Operating Partnership Agreement, neither the
in its own name and temporarily hold title thereto for general partner nor any of its affiliates may sell,
the purpose of facilitating its acquisition or transfer or convey any property to the AIMCO Operating
financing by your partnership if (1) the property is Partnership, directly or indirectly, except pursuant to
purchased by your partnership for a price no greater transactions that are determined by the general partner
than the cost of the property to the general partner or in good faith to be fair and reasonable.
its affiliate, (2) no difference exists in the interest
rates of the loans secured by the property at the time
acquired by the general partner or its affiliates and
at the time acquired by your partnership and (3)
neither the general partner nor its affiliates receive
any economic advantage by reason of holding or having
held title to the property. Your partnership may also
lease property to a partnership sponsored by the
general partner or its affiliates so long as the terms
of the lease are comparable to, or no less favorable to
your partnership than those offered to and accepted by
unrelated persons for comparable space and contained in
a written contract which precisely describes the
subject matter thereof and all compensation to be paid,
which contract, if not previously disclosed, must be
fully and properly disclosed to all partners. Your
partnership may also invest in entities affiliated with
your general partner if certain conditions are met.
Your partnership may not make loans to the general
partner or its affiliates but the general partner and
its affiliates may lend money to your partnership
provided that the interest and other financing
</TABLE>
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<PAGE> 1264
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
charges on loans to your partnership may not be in
excess of amounts paid by the general partner for
borrowed funds (provided, however, that such interest
rates and charges are not in excess of rates and
charges which would be charged by unrelated lending
institutions on comparable loans for the same purpose,
in the same locality of the property (if such loan is
made in connection with a particular property). Such
loans may not require a prepayment charge or penalty if
such loan is secured by a mortgage or encumbrance of
your partnership's property. Unless certain conditions
are met, your partnership may not finance the purchase
of your partnership's property by use of a "wraparound"
or "all-inclusive" note and mortgage or deed of trust
under which the general partner or any of its
affiliates are the obligee or secured party. Your
partnership may not grant to the general partner or its
affiliates an exclusive right or an exclusive employ-
ment to sell your partnership's property.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money and to secure such debt by mortgage, restrictions on borrowings, and the general partner has
pledge or other lien on any of the assets of your full power and authority to borrow money on behalf of
partnership. The general partner of your partnership the AIMCO Operating Partnership. The AIMCO Operating
may not, in connection with the acquisition of assets, Partnership has credit agreements that restrict, among
subject any asset of your partnership to one or more other things, its ability to incur indebtedness. See
mortgages, deeds of trust or other security interest, "Risk Factors -- Risks of Significant Indebtedness" in
so that the aggregate amount of indebtedness secured by the accompanying Prospectus.
mortgages, deeds of trust and other security interests
to which all partnership assets are subject,
immediately after such action, is greater than 80% of
the aggregate amount of the purchase price of all
assets. Your partnership may not issue debt securities
to the public. The general partner may not acquire a
property subject to or subject a property to financing
in which the balloon payments represent 25% or more of
the purchase price or secondary financing which
represents 10% or more of the purchase price which
contains a provision of a balloon payment due and
payable prior to the earlier of (1) ten years from the
date your partnership acquired the property or (2) two
years beyond the estimated holding period for the
property, but in no event prior to seven years from the
date of acquisition of the property. All financing
incurred by your partnership will generally provide for
periodic payments in an amount which would be
sufficient to self-liquidate the loans over periods of
not more than thirty years. The general partner may not
acquire any real property which, at the date of the
acquisition, is subject to indebtedness secured by a
mortgage, deed of trust or other security interest on
the real property having an unpaid principal balance
immediately after the acquisition equal to less than
50% of the purchase price of the real property paid by
your partnership. No creditor who makes a non-recourse
loan to your partnership will have or acquire at any
time, as a result of making such loan, any direct or
indirect interest in the profits, capital or property
of your partnership, other than as a secured creditor.
</TABLE>
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<PAGE> 1265
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner to inspect the register with a statement of the purpose of such demand and at
listing the names and addresses of all partners and the such OP Unitholder's own expense, to obtain a current
number of units owned by each limited partner. Such list of the name and last known business, residence or
list will be maintained at the principal office of your mailing address of the general partner and each other
partnership and be available for inspection at all OP Unitholder.
reasonable times. In addition, each partner has the
right to receive by mail, upon written request to your
partnership and at such partner's cost, the register of
the partners.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has complete All management powers over the business and affairs of
and exclusive control over the management of your the AIMCO Operating Partnership are vested in AIMCO-GP,
partnership's business and affairs. Subject to the Inc., which is the general partner. No OP Unitholder
limitations contained in your partnership's agreement has any right to participate in or exercise control or
of limited partnership, the general partner has the management power over the business and affairs of the
right, power and authority, on behalf of your AIMCO Operating Partnership. The OP Unitholders have
partnership, and in its name, to exercise all of the the right to vote on certain matters described under
rights, powers and authority of a partner of a "Comparison of Ownership of Your Units and AIMCO OP
partnership without limited partners under California Units -- Voting Rights" below. The general partner may
law. Limited partners have no right to participate in not be removed by the OP Unitholders with or without
the management or conduct of your partnership's cause.
business or affairs nor any power or authority to act
for or on behalf of your partnership in any respect In addition to the powers granted a general partner of
whatsoever. a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, the general partner of your partnership the AIMCO Operating Partnership Agreement, the general
and its affiliates are not liable to your partnership partner is not liable to the AIMCO Operating
or any limited partner for any act or any failure to Partnership for losses sustained, liabilities incurred
act so long as such act or failure to act was performed or benefits not derived as a result of errors in
in a manner determined in good faith to be within the judgment or mistakes of fact or law of any act or
scope of the general partner's authority and to be in omission if the general partner acted in good faith.
the best interests of your partnership, and so long as The AIMCO Operating Partnership Agreement provides for
such party was not guilty of negligence, misconduct or indemnification of AIMCO, or any director or officer of
a breach of its fiduciary obligations in such act or AIMCO (in its capacity as the previous general partner
failure to act. In addition, your partnership will of the AIMCO Operating Partnership), the general
indemnify the general partner and its affiliates partner, any officer or director of general partner or
against any claim or liability by or to any person the AIMCO Operating Partnership and such other persons
other than your partnership for any acts or failures to as the general partner may designate from and against
act described above. Any such indemnity provided will all losses, claims, damages, liabilities, joint or
be paid, from and only to the extent of, partnership several, expenses (including legal fees), fines,
assets. In no event, however, will such indemnification settlements and other amounts incurred in connection
cover liabilities arising under the state securities with any actions relating to the operations of the
laws and the Securities Act of 1933, as amended. AIMCO Operating Partnership, as set forth in the AIMCO
Operating Partnership Agreement. The Delaware Limited
Partnership Act provides that
</TABLE>
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<PAGE> 1266
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
subject to the standards and restrictions, if any, set
forth in its partnership agreement, a limited
partnership may, and shall have the power to, indemnify
and hold harmless any partner or other person from and
against any and all claims and demands whatsoever. It
is the position of the Securities and Exchange Commis-
sion that indemnification of directors and officers for
liabilities arising under the Securities Act is against
public policy and is unenforceable pursuant to Section
14 of the Securities Act of 1933.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner upon a vote of the limited partners owning a affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units. A substitute general partner may not be removed as general partner of the
partner may be admitted with the consent of the general AIMCO Operating Partnership by the OP Unitholders with
partner if such party consents to become a general or without cause. Under the AIMCO Operating Partnership
partner, the limited partners holding more than 50% of Agreement, the general partner may, in its sole
the outstanding units consent to the admission of the discretion, prevent a transferee of an OP Unit from
substitute general partner, the substitute general becoming a substituted limited partner pursuant to the
partner executes and acknowledges such instruments as AIMCO Operating Partnership Agreement. The general
the general partner deems necessary or advisable, partner may exercise this right of approval to deter,
including the adoption of your partnership's agreement delay or hamper attempts by persons to acquire a
of limited partnership and such other conditions as are controlling interest in the AIMCO Operating Partner-
set forth in your partnership's agreement of limited ship. Additionally, the AIMCO Operating Partnership
partnership is satisfied. The general partner may admit Agreement contains restrictions on the ability of OP
additional general partners without the consent of the Unitholders to transfer their OP Units. See
limited partners. No limited partner may substitute a "Description of OP Units -- Transfers and Withdrawals"
transferee of his units in such limited partner's place in the accompanying Prospectus.
without the consent of the general partner which may be
withheld at the sole discretion of the general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners if such amendment: (1) adds to the general partner may, without the consent of the OP
the representation, duties, or obligations of the Unitholders, amend the AIMCO Operating Partnership
general partner or its affiliates or surrenders any Agreement, amendments to the AIMCO Operating
right or power granted to the general partner or its Partnership Agreement require the consent of the
affiliates for the benefit of the limited partner, (2) holders of a majority of the outstanding Common OP
cures any ambiguity, corrects or supplements any Units, excluding AIMCO and certain other limited
provision which may be inconsistent with any other exclusions (a "Majority in Interest"). Amendments to
provision or makes any other provision with respect to the AIMCO Operating Partnership Agreement may be
matters or questions arising under your partnership's proposed by the general partner or by holders of a
agreement of limited partnership consistent with the Majority in Interest. Following such proposal, the
provisions of your partnership's agreement of limited general partner will submit any proposed amendment to
partnership, (3) deletes or adds any provision required the OP Unitholders. The general partner will seek the
by any applicable law, (4) reflects any reduction of written consent of the OP Unitholders on the proposed
the partners' capital accounts, (5) reflects a change amendment or will call a meeting to vote thereon. See
in the name or the location of the principal place of "Description of OP Units -- Amendment of the AIMCO
business of your partnership and (6) reduces the Operating Partnership Agreement" in the accompanying
required minimum investment in your partnership to Prospectus.
effect the participation of your partnership in a
program designed to facilitate secondary trading of the
units. Your partnership's agreement of limited
partnership may not be amended to change your partner-
ship to a general partnership, extend the term of your
partnership, allow the expulsion of the non-managing
general partner without the simultaneous expulsion of
the managing general partner or change the liability of
the general partner or the limited partners. Any
amendment which diminishes the rights of the general
partner may not be made without the consent of the
general partner or all of the limited partners. All
other amendments to your partnership's agreement of
limited partnership must be approved by the limited
partners owning more than 50% of the units.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership receives no The general partner does not receive compensation for
annual management fee for its services as general its services as general partner of the AIMCO Operating
partner but may receive reimbursement for expenses Partnership. However, the general partner is entitled
incurred in such capacity. to payments, allocations and distributions in its
capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for the negligence, no OP Unitholder has personal liability for
debts, liabilities, or obligations of your partnership the AIMCO Operating Partnership's debts and
in excess of his capital contribution. obligations, and liability of the OP Unitholders for
the AIMCO Operating Partnership's debts and obligations
is generally limited to the amount of their invest-
ment in the AIMCO Operating Partnership. However, the
limitations on the liability of limited partners for
the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner may not possess your partnership agreement, Delaware law generally requires
partnership's property or assign rights in specific a general partner of a Delaware limited partnership to
properties of your partnership, for other than the adhere to fiduciary duty standards under which it owes
exclusive benefit of your partnership. The general its limited partners the highest duties of good faith,
partner must diligently and faithfully devote as much fairness and loyalty and which generally prohibit such
of its time to the business of your partnership as may general partner from taking any action or engaging in
be necessary to properly conduct the affairs of your any transaction as to which it has a conflict of
partnership. The general partner has a fiduciary interest. The AIMCO Operating Partnership Agreement
responsibility for the safekeeping and use of all of expressly authorizes the general partner to enter into,
your partnership's funds and assets, whether or not on behalf of the AIMCO Operating Partnership, a right
they are in its immediate possession or control. The of first opportunity arrangement and other conflict
general partner may not employ or permit others to avoidance agreements with various affiliates of the
employ such funds or assets in any manner except for AIMCO Operating Partnership and the general partner, on
the benefit of your partnership nor commingle funds of such terms as the general partner, in its sole and
your partnership with any other person. The general absolute discretion, believes are advisable. The AIMCO
partner may delegate any or all of its powers, rights Operating Partnership Agreement expressly limits the
and obligations under your partnership's agreement of liability of the general partner by providing that the
limited partners and in furtherance of any such general partner, and its officers and directors will
delegation may appoint, employ or contract with any not be liable or accountable in damages to the AIMCO
person for the account of your partnership for the Operating Partnership, the limited partners or
transaction of the business of your partnership, which assignees for errors in judgment or mistakes of fact or
person may, under the supervision of the general law or of any act or omission if the general partner or
partner, perform such acts or services for your such director or officer acted in good faith. See
partnership as the general partnership may approve. The "Description of OP Units -- Fiduciary Responsibilities"
general partner and its affiliates may acquire real in the accompanying Prospectus.
properties for their own account, or engage in the
acquisition, development, operation or management of
real estate on behalf of other entities, including
business ventures similar to, related to or
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
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in direct or indirect competition with any business of
your partnership. Neither your partnership nor any
other partner will have any right in or to such other
business ventures or the income or profits derived
therefrom.
</TABLE>
Federal Income Taxation
<TABLE>
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In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
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The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom gener-
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
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ally will be retained by the AIMCO
Operating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
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Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove a general Prospectus. So long as any institution of bankruptcy
partner; approve the admission of a Preferred OP Units are outstand- proceedings, an assignment for the
substituted general partner and ing, in addition to any other vote benefit of creditors and certain
approve or disapprove the sale in or consent of partners required by transfers by the general partner of
single sale or a series of sales law or by the AIMCO Operating its interest in the AIMCO Operating
which are part of single Partnership Agreement, the Partnership or the admission of a
transaction of substantially all of affirmative vote or consent of successor general partner.
the assets of your partnership. holders of at least 50% of the
outstanding Preferred OP Units will Under the AIMCO Operating Partner-
A general partner may cause the be necessary for effecting any ship Agreement, the general partner
dissolution of your partnership by amendment of any of the provisions has the power to effect the
retiring. In such event, your of the Partnership Unit Desig- acquisition, sale, transfer,
partnership may be continued by the nation of the Preferred OP Units exchange or other disposition of
remaining general partner if, in that materially and adversely any assets of the AIMCO Operating
the opinion of counsel to your affects the rights or preferences Partnership (including, but not
partnership, such election would of the holders of the Preferred OP limited to, the exercise or grant
not jeopardize your partnership's Units. The creation or issuance of of any conversion, option,
status as a partnership for tax any class or series of partnership privilege or subscription right or
purposes. If no general partner units, including, without any other right available in
remains, your partnership may limitation, any partnership units connection with any assets at any
continue if, within ninety days of that may have rights senior or time held by the AIMCO Operating
the retirement, the limited superior to the Preferred OP Units, Partnership) or the merger,
partners holding more than 50% of shall not be deemed to materially consolidation, reorganization or
the units elect a substitute adversely affect the rights or other combination of the AIMCO
general partner who is willing to preferences of the holders of Operating Partnership with or into
continue your partnership. Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Distributions
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Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Net Cash from $ per Preferred OP Unit; tribute quarterly all, or such
Operations remaining after provided, however, that at any time portion as the general partner may
compensation is paid to the general and from time to time on or after in its sole and absolute discretion
partner for its services are to be the fifth anniversary of the issue determine, of Available Cash (as
made quarterly to the partners in date of the Preferred OP Units, the defined in the AIMCO Operating
proportion to the interests in your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership. The distributions adjust the annual distribution rate the AIMCO Operating Partnership
payable to the partners are not on the Preferred OP Units to the during such quarter to the general
fixed in amount and depend upon the lower of (i) % plus the annual partner, the special limited
operating results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may transfer his There is no public market for the There is no public market for the
units to any person if: (1) the Preferred OP Units and the OP Units. The AIMCO Operating Part-
interest transferred Preferred OP
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
is not with respect to any fraction Units are not listed on any nership Agreement restricts the
unit and if such assignment is less securities exchange. The Preferred transferability of the OP Units.
than all of the units held by the OP Units are subject to Until the expiration of one year
assignor, after the transfer, the restrictions on transfer as set from the date on which an OP
assignor and assignee each hold at forth in the AIMCO Operating Unitholder acquired OP Units,
least five units, except in certain Partnership Agreement. subject to certain exceptions, such
circumstances, (2) the assignee and OP Unitholder may not transfer all
the assignor execute, acknowledge Pursuant to the AIMCO Operating or any portion of its OP Units to
and deliver to the general partner Partnership Agreement, until the any transferee without the consent
a written assignment, (3) the expiration of one year from the of the general partner, which
transfer, when added to all other date on which a holder of Preferred consent may be withheld in its sole
assignments taking place in the OP Units acquired Preferred OP and absolute discretion. After the
preceding 12 months, in the opinion Units, subject to certain expiration of one year, such OP
of counsel to your partnership, exceptions, such holder of Unitholder has the right to
does not result in termination of Preferred OP Units may not transfer transfer all or any portion of its
your partnership for Federal tax all or any portion of its Pre- OP Units to any person, subject to
purposes and the transferor ferred OP Units to any transferee the satisfaction of certain
receives a ruling from the IRS to without the consent of the general conditions specified in the AIMCO
such effect and (4) the assignor partner, which consent may be Operating Partnership Agreement,
and assignee have complied with withheld in its sole and absolute including the general partner's
such other conditions as deter- discretion. After the expiration of right of first refusal. See
mined by the general partner to one year, such holders of Preferred "Description of OP Units --
comply with any state securities OP Units has the right to transfer Transfers and Withdrawals" in the
regulatory authority. Such all or any portion of its Preferred accompanying Prospectus.
transferee may be substituted as a OP Units to any person, subject to
limited partner if: (1) the general the satisfaction of certain After the first anniversary of
partner consents in writing, which conditions specified in the AIMCO becoming a holder of Common OP
consent may be granted or denied in Operating Partnership Agreement, Units, an OP Unitholder has the
the sole discretion of the general including the general partner's right, subject to the terms and
partner, (2) the transferor elects right of first refusal. conditions of the AIMCO Operating
to become a substitute limited Partnership Agreement, to require
partner by delivering to the After a one-year holding period, a the AIMCO Operating Partnership to
general partner a written notice, holder may redeem Preferred OP redeem all or a portion of the
executed and acknowledged by the Units and receive in exchange Common OP Units held by such party
assignor and assignee of such therefor, at the AIMCO Operating in exchange for a cash amount based
election, (3) the assignee executes Partnership's option, (i) subject on the value of shares of Class A
and acknowledges such other to the terms of any Senior Units, Common Stock. See "Description of
instruments that the general cash in an amount equal to the OP Units -- Redemption Rights" in
partner may require including an Liquidation Preference of the the accompanying Prospectus. Upon
adoption of your partnership's Preferred OP Units tendered for receipt of a notice of redemption,
agreement of limited partnership, redemption, (ii) a number of shares the AIMCO Operating Partnership
and (4) the assignee pays the of Class I Cumulative Preferred may, in its sole and absolute
partnership for its expenses Stock of AIMCO that pay an discretion but subject to the
incurred in the transaction. aggregate amount of dividends yield restrictions on the ownership of
equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 1273
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
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Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives no fees for its services as general partner but may
receive reimbursement for expenses incurred in such capacity. The general
partner received fees and reimbursements totaling $326,000 in 1996, $153,000 in
1997 and $76,000 for the first six months of 1998 in reimbursement for expenses.
The property manager received management fees of $234,000 in 1996, $251,000 in
1997 and $132,000 for the first six months of 1998. The AIMCO Operating
Partnership has no current intention of changing the fee structure for the
manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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YOUR PARTNERSHIP
GENERAL
Angeles Partners XIV was organized on June 29, 1984, under the laws of the
State of California. Its primary business is real estate ownership and related
operations. Your partnership was formed for the purpose of making investments in
various types of real properties which offer potential capital appreciation and
cash distributions to its limited partners. Your partnership's investment
portfolio currently consists of the following two residential apartment
complexes and one commercial property: Waterford Square Apartments, a 487-unit
residential apartment complex in Huntsville, Alabama; Fox Crest Apartments, a
245-unit residential apartment complex in Waukegan, Illinois; and Dayton
Industrial Complex, an approximately 80,000 square-foot industrial complex in
Dayton, Ohio. We plan to sell Dayton Industrial Complex as of October 31, 1998
for forgiveness of debt and reimbursement of legal fees. The general partner of
your partnership is Angeles Realty Corporation II, which is a majority-owned
subsidiary of AIMCO. The executive officers and directors of the general partner
are the same as those of the AIMCO GP, which are set forth in Appendix B hereto.
Insignia Residential Group, L.P., which is a majority-owned subsidiary of AIMCO,
serves as manager of the apartment properties owned by your partnership. As of
December 31, 1997, there were 43,887 units issued and outstanding, which were
held of record by 4,408 limited partners. Your partnership's principal executive
offices are located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado
80222, and its telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated February 15, 1985 (as amended), by which
units in your partnership were originally offered, the general partner of your
partnership (which at the time was not affiliated with AIMCO) indicated that it
anticipated that properties may be sold five to eight years after acquisition.
In any event, according to the prospectus, the general partner anticipated that
a disposition of the properties would depend on, among other things, past
performance of a property, market studies to ascertain potential rent increases
and market value, financial projections, and the impact of the sale on your
partnership. Under your partnership's agreement of limited partnership, the term
of the partnership will continue until December 31, 2005, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
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GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
act or any failure to act so long as such act or failure to act was performed in
a manner determined in good faith to be within the scope of the general
partner's authority and to be in the best interests of your partnership, and so
long as such party was not guilty of negligence, misconduct or a breach of its
fiduciary obligations in such act or failure to act. As a result, unitholders
might have a more limited right of action in certain circumstances than they
would have in the absence of such a provision in your partnership's agreement of
limited partnership. The general partner of your partnership is majority-owned
by AIMCO. See "Conflicts of Interest".
Under your partnership's agreement of limited partnership, your partnership
will indemnify the general partner of your partnership and its affiliates
against any claim or liability by or to any person other than your partnership
for any acts or failures to act so long as such act or failure to act was
performed in a manner determined in good faith to be within the scope of the
general partner's authority and to be in the best interests of your partnership,
and so long as such party was not guilty of negligence, misconduct or a breach
of its fiduciary obligations in such act or failure to act. The indemnification
will include payment of (1) reasonable attorney's fees or other expenses
incurred in settling any such claim or liability or incurred in any finally
adjudicated legal proceeding and (2) expenses incurred in the removal of any
liens affecting any property of the parties to be indemnified. Any such
indemnity provided will be paid, from and only to the extent of, partnership
assets. In no event, however, will such indemnification cover liabilities
arising under the state securities laws and the Securities Act of 1933, as
amended.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
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DISTRIBUTIONS
Your partnership has not paid any distributions with respect to your units
in the past three years. The original cost per unit was $1,000.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 0.08% interest in your partnership, including 29,000 units held by us and the
interest held by Angeles Realty Corporation II, as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units, (ii) have effected any transactions in the
units in the past 60 days, or (iii) have any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of your partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning transfer or voting
thereof, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $287,244
1995........................................................ 182,534
1996........................................................ 326,000
1997........................................................ 153,000
1998 (through June 30)...................................... 76,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- --------
<S> <C>
1994........................................................ $226,742
1995........................................................ 231,168
1996........................................................ 234,000
1997........................................................ 251,000
1998 (through June 30)...................................... 132,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-78
<PAGE> 1284
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-79
<PAGE> 1285
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Angeles Partners XIV appearing in
Angeles Partners XIV's Annual Report (Form 10-KSB) for the year ended December
31, 1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
S-80
<PAGE> 1286
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 1287
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1288
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 1289
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1290
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1291
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
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<PAGE> 1292
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
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<PAGE> 1293
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexington Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1294
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1295
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CENTURY PROPERTIES FUND XVI
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1296
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Century
Properties Fund XVI........................ S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
Certain Tax Consequences to Non-Tendering and
Partially-Tendering Offerees............... S-48
VALUATION OF UNITS............................. S-49
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-52
Comparison of Consideration to Alternative
Consideration.............................. S-52
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-64
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
</TABLE>
i
<PAGE> 1297
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
Additional Information Concerning Your
Partnership................................ S-77
Originally Anticipated Term of the
Partnership................................ S-77
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-77
Property Management.......................... S-78
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-78
Distributions................................ S-78
Beneficial Ownership of Interests in Your
Partnership................................ S-78
Compensation Paid to the General Partner and
its Affiliates............................. S-79
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-79
LEGAL MATTERS.................................. S-80
EXPERTS........................................ S-80
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1298
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Century Properties Fund XVI. For each unit that you tender, you may choose
to receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Fox Capital Management
Corporation, the managing general partner of your partnership (the "general
partner"), and the company that manages the property owned by your
partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1299
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1300
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership did not pay distributions in 1996 and 1997 and is not
expected to make distributions in 1998. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred
OP Units before any distributions are paid to holders of Tax-Deferral
Common OP Units. We pay quarterly distributions on the Tax-Deferral Common
OP Units based on our funds from operations for that quarter. For the six
months ended June 30, 1998, we paid distributions of $1.125 on each of the
Tax-Deferral Common OP Units (equivalent to $2.25 on an annual basis). This
is equivalent to distributions of $ per year on the number of
Tax-Deferral % Preferred OP Units, or $ per year on the number of
Tax-Deferral Common OP Units, that you would receive in an exchange for
each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1301
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, the market for
your units may be limited.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership. In addition, if there is a sale or exchange of 50% or more of
the total interest in capital and profits of your partnership within any
12-month period, including sales or exchanges resulting from the offer,
your partnership will terminate for federal income tax purposes. Any such
termination may, among other things, subject the assets of your partnership
to longer depreciable lives than those currently applicable to the assets
of your partnership. This would generally decrease the annual average
depreciation deductions allocable to you if you do not tender all of your
units (thereby increasing the taxable income allocable to your units each
year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership. Any such
termination may also change (and possibly shorten) your holding period with
respect to your units that you choose to retain.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF THE OFFER. THIS SUMMARY DOES NOT DISCUSS ALL
ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF
YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE
OFFER TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX
SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR
TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE
OFFER.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $8.10 per unit to $75.00 per unit
over from January 1, 1997 to September 30, 1998.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real
S-4
<PAGE> 1302
estate, each of which may result in different valuations of the property.
The proceeds that you would receive if you sold your units to someone else
or if your partnership were actually liquidated might be higher or lower
than our offer consideration. An actual liquidation may also result in your
paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of 10
units (except for units held by IRAs and Keogh Plans). You may tender
fractional units only if you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
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<PAGE> 1303
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
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<PAGE> 1304
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $8.10 per unit to $75.00 per
unit from January 1, 1997 through September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
In addition, if there is a sale or exchange of 50% or more of the total
interest in capital and profits of your partnership within any 12-month period,
including sales or exchanges resulting from the offer, your partnership will
terminate for federal income tax purposes. Any such termination may, among other
things, subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
if you do not tender all of your units (thereby increasing the taxable income
allocable to your units each year), but would have no effect on the total
depreciation deductions available over the useful lives of the assets of your
partnership. Any such termination may also change (and possible shorten) your
holding period with respect to your units that you choose to retain.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because
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<PAGE> 1306
the income tax consequences of an exchange of units will not be the same for
everyone, you should consult your tax advisor before determining whether to
tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence
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<PAGE> 1307
on matters affecting the operation of the AIMCO Operating Partnership and third
parties may find it difficult to attempt to gain control or influence the
activities of our operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the time, Moody's, Standard & Poor's and Duff & Phelps confirmed its existing
ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although
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<PAGE> 1308
these agreements provide us with some protection against rising interest rates,
these agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
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POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
36.1% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of
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<PAGE> 1310
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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<PAGE> 1311
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
S-14
<PAGE> 1312
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
S-15
<PAGE> 1313
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 1314
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $8.10 to $75.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 1315
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner. Also, your partnership is limited as to the number of limited partner
interests it may issue while the AIMCO Operating Partnership has no such
limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to 5% of your partnership's cash available for
distribution for its services as general partner and may receive reimbursement
for expenses generated in such capacity. For the first six months of 1998, the
general partner received $55,000 in such fees and reimbursements. The property
manager received management fees of $74,000 for the first six months of 1998. We
have no current intention of changing the fee structure for your property
manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Century Properties Fund XVI was organized on December 30, 1980, under the
laws of the State of California. Its primary business is real estate ownership
and related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
S-18
<PAGE> 1316
appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following two
residential apartment complexes: The Landings Apartments, a 200-unit complex in
Tampa, Florida and Woods at Inverness Apartments, a 272-unit complex in Houston,
Texas. The general partner of your partnership is Fox Capital Management
Corporation, which is a majority-owned subsidiary of AIMCO. A majority-owned
subsidiary of AIMCO serves as manager of the properties owned by your
partnership. As of June 30, 1998, there were 130,000 units of limited
partnership interest issued and outstanding, which were held of record by 5,534
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1317
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995 and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1318
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1319
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1320
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1321
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1322
SUMMARY FINANCIAL INFORMATION OF CENTURY PROPERTIES FUND XVI
The summary financial information of Century Properties Fund XVI for the
six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Century Properties Fund XVI for the years ended December 31,
1997, 1996, and 1995 is based on audited financial statements. This information
should be read in conjunction with such financial statements, including the
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" incorporated by reference herein.
CENTURY PROPERTIES FUND XVI
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
---------------- --------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues....................................... $1,482 $1,379 $2,867 $2,721 $2,762
Net Income(Loss)..................................... 69 (50) (157) (667) (475)(A)
Net Income (Loss) per limited partnership unit....... 0.49 (0.36) (1.12) (4.78) (4.98)
Distributions per limited partnership unit........... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
---------------- --------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation......... $7,516 $7,806 $7,644 $7,827 $8,083
Total Assets......................................... 8,686 8,747 8,787 8,914 9,471
Notes Payable........................................ 7,385 7,457 7,422 7,487 7,550
Partners' Capital (Deficit).......................... 963 1,001 894 1,051 1,718
</TABLE>
- ---------------
(A) Loss before extraordinary item.
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CENTURY PROPERTIES
PARTNERSHIP FUND XVI
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0 $0
</TABLE>
S-25
<PAGE> 1323
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $8.10 per unit to
$75.00 per unit from January 1, 1997 to September 30, 1998. We have retained
Stanger to conduct an analysis of our offer and to render an opinion as to the
fairness to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. Furthermore, your general partner has no present intention
to liquidate your partnership, and your partnership's agreement of limited
partnership does not require a sale of your partnership's properties by any
particular date.
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to
S-26
<PAGE> 1324
remove, for any reason, your general partner or the manager of your
partnership's property from its current position would result in a decrease or
elimination of the substantial fees paid to your general partner or the property
manager for services provided to your partnership. Your general partner makes no
recommendation to you as to whether you should tender your units. Such conflicts
of interest in connection with our offer and our operation's differ from those
conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
In addition, if there is a sale or exchange of 50% or more of the total
interest in capital and profits of your partnership within any 12-month period,
including sales or exchanges resulting from the offer, your partnership will
terminate for federal income tax purposes. Any such termination may, among other
things, subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
if you do not tender all of your units (thereby increasing the taxable income
allocable to your units each year), but would have no effect on the total
depreciation deductions available over the useful lives of the assets of your
partnership. Any such termination may also change (and possibly shorten) your
holding period with respect to your units that you choose to retain.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 1325
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Your
partnership did not pay any distribution in 1996 and 1997 and is not expected to
make any distributions in 1998. Therefore, distributions with respect to the
Preferred OP Units and Common OP Units that we are offering are expected to be
, immediately following our offer, than the distributions with respect to
your units. See "Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
S-28
<PAGE> 1326
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
POSSIBLE TERMINATION OF YOUR PARTNERSHIP FOR FEDERAL INCOME TAX
PURPOSES. If there is a sale or exchange of 50% or more of the total interest in
capital and profits of your partnership within any 12-month period, including
sales or exchanges resulting from the offer, your partnership will terminate for
federal income tax purposes. Any such termination may, among other things,
subject the assets of your partnership to longer depreciable lives than those
currently applicable to the assets of your partnership. This would generally
decrease the annual average depreciation deductions allocable to you if you do
not tender all of your units (thereby increasing the taxable income allocable to
your units each year), but would have no effect on the total depreciation
deductions available over the useful lives of the assets of your partnership.
Any such termination may also change (and possibly shorten) your holding period
with respect to your units that you choose to retain.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity, which manages
the properties owned by your partnership. Through subsidiaries, AIMCO currently
owns, in the aggregate, approximately a 36.1% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A
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Common Stock, at AIMCO's option. The transactions contemplated by the IPT Merger
Agreement are subject to certain conditions. The IPT Merger requires the
approval of the holders of a majority of the outstanding IPT Shares. AIMCO has
indicated that it expects to vote all of the IPT Shares owned by it in favor of
the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
On October 15, 1998, Madison Liquidity Investors 104, LLC ("Madison"),
which is not affiliated with us or your general partner, commenced a tender
offer to acquire units of your partnership. Madison is seeking to acquire up to
4.9% of the outstanding units for $7 per unit, less transfer fees. The offer
expires November 20, 1998.
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In 1994, DeForest Ventures I L.P. commenced a
tender offer. In 1995, DeForest Ventures I L.P. commenced another tender offer
to purchase 24,031 units for $16.27 per unit as part of the settlement of
litigation which arose from the 1994 tender offer.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty
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under the mortgage for the property. Your general partner believes it currently
is in the best interest of your partnership to continue holding its real estate
assets. Another option for liquidation would be to sell your units in a private
transaction. Any such sale likely would be at a very substantial discount from
your pro rata share of the fair market value of your partnership's property and
might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one
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basis, subject to adjustment in certain circumstances) or an equivalent
amount of cash. AIMCO's Class A Common Stock is listed and traded on the
New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of 10 units (except for units held by IRAs and Keogh Plans).
You may tender fractional units only if you are tendering all of your units. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings, approvals or other actions by or with any
domestic or foreign governmental authority or administrative or regulatory
agency that would be required prior to the acquisition of units by the AIMCO
Operating Partnership pursuant to the offer as contemplated herein, other than
the filing with the SEC of a Tender Offer Statement on Schedule 14D-1 and any
amendments required thereto. While there is no present intent to delay the
purchase of units tendered pursuant to the offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
your partnership's business, or that certain parts of your partnership's
business might not have to be disposed of or other substantial conditions
complied with in order to obtain such approval or action, any of which could
cause the AIMCO Operating Partnership to elect to terminate the offer without
purchasing units hereunder. The AIMCO Operating Partnership's obligation to
purchase and pay for units is subject to certain conditions, including
conditions related to the legal matters discussed in this section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
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Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have filed an amended complaint. On October
14, 1998, the AIMCO and Insignia defendants filed demurrers to the amended
complaint. The demurrers are scheduled to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate
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compensatory damages to exceed $15 million. An answer to the complaint was
filed by the defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
S-46
<PAGE> 1344
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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<PAGE> 1345
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
CERTAIN TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING OFFEREES
Section 708 of the Code provides that if there is a sale or exchange of 50%
or more of the total interest in capital and profits of a partnership within any
12-month period, such partnership terminates for federal income tax purposes (a
"Termination"). It is possible that the AIMCO Operating Partnership's
acquisition of units pursuant to the offer could result in a Termination of your
partnership. If a purchase of units results in a Termination, the following
federal income tax events will be deemed to occur with respect to such
Termination: the terminated Partnership (the "Old Partnership") will be deemed
to have contributed all of its assets (subject to its liabilities) (the
"Hypothetical Contribution") to a new partnership (the "New Partnership") in
exchange for an interest in the New Partnership and, immediately thereafter, the
Old Partnership will be deemed to have distributed interests in the New
Partnership (the "Hypothetical Distribution") to the AIMCO Operating Partnership
and offerees who do not tender all of their units (a "Remaining Offeree") in
proportion to their respective interests in the Old Partnership in liquidation
of the Old Partnership.
A Remaining Offeree will not recognize any gain or loss upon the
Hypothetical Distribution or upon the Hypothetical Contribution and the capital
accounts of the Remaining Offerees in the Old Partnership will carry over intact
into the New Partnership. Any Termination may change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes.
The New Partnership's adjusted tax basis in its assets will carry over from
the Old Partnership's basis in such assets immediately before the Termination.
Any Termination may also subject the assets of the New Partnership to
depreciable lives in excess of those currently applicable to the Old
Partnership. This would generally decrease the annual average depreciation
deductions allocable to the Remaining Offerees following consummation of the
Offer (thereby increasing the taxable income allocable to their retained units
each year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership.
Section 704(c) of the code will apply to future allocation of income, gain,
loss and deductions with respect to any New Partnership assets among the AIMCO
Operating Partnership and the Remaining Offerees following the consummation of
the offer only to the extent that such assets were Section 704(c) property in
the hands of the Old Partnership immediately prior to the Hypothetical
Contribution. Moreover, subject to the Code's anti-abuse regulations, the New
Partnership will not be required to apply the same Section 704(c) allocation
method applied by the Old Partnership. The Hypothetical Contribution will not
trigger a new five-year holding period for purposes of measuring
post-contribution appreciation of assets for the offeree who contributed such
assets.
Elections as to certain tax matters previously made by the Old Partnership
prior to Termination will not be applicable to the New Partnership unless the
New Partnership chooses to make the same elections.
Additionally, upon a Termination, the Old Partnership's taxable year will
close for all offerees. In the case of a Remaining Offeree reporting on a tax
year other than a calendar year, the closing of your partnership's taxable year
may result in more than 12 months' taxable income or loss of the Old Partnership
being includable in such Offeree's taxable income for the year of Termination.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
S-48
<PAGE> 1346
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET GROSS
OPERATING CAPITALIZATION PROPERTY
PROPERTY INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
The Land Apartments $ % $
Woods of Inverness Apartments
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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<PAGE> 1347
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
S-50
<PAGE> 1348
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. Your partnership did not make distributions in
1996 and 1997 and is not expected to make distributions in 1998. This is
equivalent to distributions of $ per year on the number of
tax-deferral % Preferred OP Units, or distributions of $ per
year on the number of tax deferral Common OP Units, that you would receive
in exchange for each of your partnership's units. Therefore, distributions
with respect to the Preferred OP Units and Common OP Units that we are
offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership
of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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<PAGE> 1349
partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-52
<PAGE> 1350
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $8.10 to $75.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 670 units (representing less than .52% of the
total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to September 30, 1998, as reported by the
general partner. The transfer paperwork submitted to the general partner often
does not include the requested price information or contains conflicting
information as to the actual sales price. Accordingly, you should not rely upon
this information as being completely accurate.
CENTURY PROPERTIES FUND XVI
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER(A)
-----------------------------
LOW SALES HIGH SALES
PRICE PRICE
PER UNIT PER UNIT
------------- -------------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter............................................. $ 6.25 $70.00
Second Quarter............................................ 6.56 $37.00
First Quarter............................................. 12.00 75.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................................ 6.10 6.10
Third Quarter............................................. 1.00 7.10
Second Quarter............................................ 7.10 26.67
First Quarter............................................. 8.10 58.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................................ 11.17 27.56
Third Quarter............................................. Not Available Not Available
Second Quarter............................................ Not Available Not Available
First Quarter............................................. Not Available Not Available
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust,
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<PAGE> 1351
trustee to trustee transfers, termination of a benefit plan, distributions
from a qualified or non-qualified plan, uniform gifts, abandonment of units
or similar non-sale transactions).
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Woods of Inverness Apartments was appraised in November 1995 by
an independent, third party appraiser, Koeppel Tener Real Estate Services, Inc.
(the "Appraiser"). According to the appraisal report, the scope of the appraisal
included an inspection of the property and an analysis of the surrounding
market. The Appraiser relied principally on the income capitalization approach
to valuation and secondarily on the sales comparison approach, and represented
that its report was prepared in accordance with the Code of Professional Ethics
and Standards of Professional Appraisal Practice of the Appraisal Institute and
the Uniform Standards of Professional Appraisal Practice, and in compliance with
the Appraisal Standards set forth in the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (known as "FIRREA"). The estimated market value of
the fee simple estate of the property specified in that appraisal report was
$7,400,000. A copy of the summary of the appraisal has been filed as an exhibit
to the AIMCO Operating Partnership's Tender Offer Statement on Schedule 14D-1
filed with the SEC. Independent appraisals have not been conducted for any of
the partnership's other properties in the past three years.
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
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<PAGE> 1352
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
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<PAGE> 1353
similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
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<PAGE> 1354
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
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<PAGE> 1355
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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<PAGE> 1356
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
Form of Organization and Assets Owned
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Cash Available For Distribution (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2025. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership was formed to invest in, acquire, The purpose of the AIMCO Operating Partnership is to
manage and ultimately sell income producing real conduct any business that may be lawfully conducted by
properties which are improved or capable of improvement a limited partnership organized pursuant to the
or which will be improved within a reasonable period Delaware Revised Uniform Limited Partnership Act (as
after acquisition and to make, service and ultimately amended from time to time, or any successor to such
dispose of mortgage loans on income producing real statute) (the "Delaware Limited Partnership Act"),
properties. Your partnership may enter into ventures, provided that such business is to be conducted in a
partnerships, and other business arrangements with manner that permits AIMCO to be qualified as a REIT,
respect to real estate deemed prudent by the general unless AIMCO ceases to qualify as a REIT. The AIMCO
partner in order to promote the business of the Operating Partnership is authorized to perform any and
partnership, subject, however, to the provisions of all acts for the furtherance of the purposes and
your partnership's agreement of limited partnership. business of the AIMCO Operating Partnership, provided
Investments in limited partnership interests of another that the AIMCO Operating Partnership may not take, or
program are prohibited; however, nothing precludes your refrain from taking, any action which, in the judgment
partnership from investing in partnerships or joint of its general partner could (i) adversely affect the
ventures which own or operate a particular property, ability of AIMCO to continue to qualify as a REIT, (ii)
provided that your partnership does not pay duplicate subject AIMCO to certain income and excise taxes, or
property management or other fees. Additionally, your (iii) violate any law or regulation of any governmental
partnership may engage in any other business or do any body or agency (unless such action, or inaction, is
and all acts and things which may be necessary, specifically consented to by AIMCO). Subject to the
incidental or convenient to carry on the partnership's foregoing, the AIMCO Operating Partnership may invest
purpose and business as specified above. in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 1357
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 130,000 units for time to the limited partners and to other persons, and
cash to selected persons who fulfill the requirements to admit such other persons as additional limited
set forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. However, after July 31, No action or consent by the OP Unitholders is required
1982, the general partner is prohibited from admitting in connection with the admission of any additional OP
any additional limited partners. Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your general partner may not enter into a funds or other assets to its subsidiaries or other
contract with your partnership that would bind the persons in which it has an equity investment, and such
partnership after the removal of the general partner. persons may borrow funds from the AIMCO Operating
Your general partner may not grant itself or an Partnership, on terms and conditions established in the
affiliate an exclusive listing for the sale or sole and absolute discretion of the general partner. To
partnership assets, purchase or lease real property the extent consistent with the business purpose of the
from the partnership, or sell or lease real property in AIMCO Operating Partnership and the permitted
which the general partner has an interest to the activities of the general partner, the AIMCO Operating
partnership. Your partnership may not lend money to the Partnership may transfer assets to joint ventures,
general partner. The general partner may not make limited liability companies, partnerships,
long-term secured loans to your partners and, on corporations, business trusts or other business
short-term unsecured loans made to your partnership, entities in which it is or thereby becomes a
may not receive interest or other financing charges or participant upon such terms and subject to such
fees in excess of those amounts which would be charged conditions consistent with the AIMCO Operating Part-
by third party financing institutions on comparable nership Agreement and applicable law as the general
loans for the same purpose in the same geographic area partner, in its sole and absolute discretion, believes
(such interest rate per annum will not exceed 2% above to be advisable. Except as expressly permitted by the
the prime rate as charged by Wells Fargo Bank, N.A., of AIMCO Operating Partnership Agreement, neither the
San Francisco). Unless certain conditions are general partner nor any of its affiliates may sell,
satisfied, the general partner may not issue a transfer or convey any property to the AIMCO Operating
wrap-around note or mortgage to your partnership to Partnership, directly or indirectly, except pursuant to
finance the purchase of property. The general partner transactions that are determined by the general partner
may not receive any insurance brokerage fees for in good faith to be fair and reasonable.
issuing any insurance policy to your partnership or any
commission for the placement of mortgages or trust deed
loans on your partnership's properties. Your general
partner may not cause your partnership to enter into
any contract with the general partner to construct or
develop properties or to render any services in
connection with such construction or development. Your
general partner may not cause your partnership to enter
into any transaction with any other real estate program
in which the general partner or any affiliate has an
interest.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money, establish a line of credit and issue restrictions on borrowings, and the general partner has
evidences of indebtedness in furtherance of any of the full power and authority to borrow money on behalf of
purposes of your partnership and to secure such debt by the AIMCO Operating Partnership. The AIMCO Operating
mortgage, pledge or other lien on any of the assets of Partnership has credit agreements that restrict, among
your partnership. Your partnership may not incur long- other things, its ability to incur
</TABLE>
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<PAGE> 1358
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
term secured indebtedness with respect to a property of indebtedness. See "Risk Factors -- Risks of Significant
your partnership which exceeds 80% of the then Indebtedness" in the accompanying Prospectus.
appraised value of such property.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
provides that a limited partner upon written request, with a statement of the purpose of such demand and at
after payment of the reasonable expense of duplication such OP Unitholder's own expense, to obtain a current
and for any proper purpose, will be sent a copy of the list of the name and last known business, residence or
certificate or certificates of limited partnership mailing address of the general partner and each other
containing the most recent listing of limited partner OP Unitholder.
names, addresses and capital contributions.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership, subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership. No the right to vote on certain matters described under
limited partner has any authority or right to act for "Comparison of Ownership of Your Units and AIMCO OP
or bind your partnership or participate in or have any Units -- Voting Rights" below. The general partner may
control over your partnership business except as not be removed by the OP Unitholders with or without
required by law. cause.
In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Notwithstanding anything to the contrary set forth in
does not provide for any limitation on the liability of the AIMCO Operating Partnership Agreement, the general
the general partner to your partnership or the limited partner is not liable to the AIMCO Operating
partners for any acts performed by it. However, your Partnership for losses sustained, liabilities incurred
general partner and any of its affiliates are entitled or benefits not derived as a result of errors in
to indemnification for any liability, loss or damage judgment or mistakes of fact or law of any act or
incurred by them or by the partnership by reason of any omission if the general partner acted in good faith.
act performed or omitted to be performed by them in The AIMCO Operating Partnership Agreement provides for
connection with the business of the partnership, indemnification of AIMCO, or any director or officer of
including costs and attorney's fees and any amounts AIMCO (in its capacity as the previous general partner
expended in the settlements of any claims of liability of the AIMCO Operating Partnership), the general
provided that if such liability arises out of any partner, any officer or director of general partner or
action or inaction of the general partner such course the AIMCO Operating Partnership and such other persons
of conduct did not constitute fraud, negligence, breach as the general partner may designate from and against
of fiduciary duty or misconduct by the general partner. all losses, claims, damages, liabilities, joint or
All judgments against the partnership and the general several, expenses (including legal fees), fines,
partner, wherein the general partner is entitled to settlements and other amounts incurred in connection
</TABLE>
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<PAGE> 1359
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
indemnification, must first be satisfied from with any actions relating to the operations of the
partnership assets before the general partner is AIMCO Operating Partnership, as set forth in the AIMCO
responsible for these obligations. Notwithstanding the Operating Partnership Agreement. The Delaware Limited
above paragraph, neither the general partner, nor any Partnership Act provides that subject to the standards
affiliate of the general partner or the partnership, and restrictions, if any, set forth in its partnership
will be indemnified from any liability incurred by them agreement, a limited partnership may, and shall have
in connection with (1) any claim or settlement the power to, indemnify and hold harmless any partner
involving allegations that the securities laws were or other person from and against any and all claims and
violated by the general partner or by any such other demands whatsoever. It is the position of the
person unless: (a) the general partner or other persons Securities and Exchange Commission that indemnification
or entities seeking indemnification are successful in of directors and officers for liabilities arising under
defending such action, and (b) such indemnification is the Securities Act is against public policy and is
specifically approved by a court of law which is unenforceable pursuant to Section 14 of the Securities
advised as to the current position of any relevant Act of 1933.
regulatory agencies regarding indemnification or
securities laws; or (2) any liability imposed by law,
including liability for fraud, bad faith or negligence.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner and elect a successor general partner upon a affairs of the AIMCO Operating Partnership. The general
vote of the limited partners owning a majority of the partner may not be removed as general partner of the
outstanding units. The general partner may admit an AIMCO Operating Partnership by the OP Unitholders with
additional or substitute general partner with the or without cause. Under the AIMCO Operating Partnership
consent of limited partners owning a majority of the Agreement, the general partner may, in its sole
outstanding units. An additional general partner may discretion, prevent a transferee of an OP Unit from
also be admitted without the consent of the limited becoming a substituted limited partner pursuant to the
partners if the addition of such person is necessary AIMCO Operating Partnership Agreement. The general
for tax purposes, such person has no authority to partner may exercise this right of approval to deter,
manage or control your partners, there is no change in delay or hamper attempts by persons to acquire a
the identity of the person who has authority to manage controlling interest in the AIMCO Operating Partner-
or control your partnership and such admission does not ship. Additionally, the AIMCO Operating Partnership
materially adversely affect the limited partners. No Agreement contains restrictions on the ability of OP
limited partner may substitute a transferee of his Unitholders to transfer their OP Units. See
units in such limited partner's place without the "Description of OP Units -- Transfers and Withdrawals"
consent of the general partner which may be withheld at in the accompanying Prospectus.
the sole discretion of the general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners (1) to reflect the addition or the general partner may, without the consent of the OP
substitution of limited partners or the reduction of Unitholders, amend the AIMCO Operating Partnership
the capital accounts upon the return of capital to Agreement, amendments to the AIMCO Operating
partners; (2) to add to the representations, duties or Partnership Agreement require the consent of the
obligations of the general partner or affiliates or holders of a majority of the outstanding Common OP
surrender any right or power granted to the general Units, excluding AIMCO and certain other limited
partner or its affiliates herein, for the benefit of exclusions (a "Majority in Interest"). Amendments to
the limited partners; (3) to cure any ambiguity, to the AIMCO Operating Partnership Agreement may be
correct or supplement any provision herein which may be proposed by the general partner or by holders of a
inconsistent with any other provision herein, or to add Majority in Interest. Following such proposal, the
any other provisions with respect to matters or general partner will submit any proposed amendment to
questions arising under your partnership's agreement of the OP Unitholders. The general partner will seek the
limited partnership, and (4) to delete or add any written consent of the OP Unitholders on the proposed
provision from or to your partnership's agreement of amendment or will call a meeting to vote thereon. See
limited partnership requested to be so deleted or added "Description of OP Units -- Amendment of the AIMCO
by any federal or state regulatory agency, which is Operating Partnership Agreement" in the accompanying
deemed by such agency to be for the benefit of the Prospectus.
limited partners. No amendment may be made without the
consent of the affected limited partner if such
amendment: (1) converts the limited partner into a
general partner, (2) eliminates or decreases the
limited liability of the limited partner, (3) alters
the interest of a partner in the allocations or
distributions from your partnership or (4) affects the
status of your partnership as a partnership for Federal
income tax purposes. Other amendments to your
partnership's agreement of limited partnership must be
approved by limited partnership holding a majority of
the then outstanding units.
</TABLE>
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<PAGE> 1360
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Compensation and Fees
<TABLE>
<S> <C>
Your general partner receives 5% of the Cash Available The general partner does not receive compensation for
For Distribution for its services as general partner its services as general partner of the AIMCO Operating
and may receive reimbursement for expenses incurred in Partnership. However, the general partner is entitled
such capacity. to payments, allocations and distributions in its
capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for any negligence, no OP Unitholder has personal liability for
debts, liabilities, contracts or obligations of your the AIMCO Operating Partnership's debts and
partnership. A limited partner is liable only to make obligations, and liability of the OP Unitholders for
payments of his capital contribution when due under the AIMCO Operating Partnership's debts and obligations
your partnership's agreement of limited partnership. is generally limited to the amount of their invest-
After its capital contribution is fully paid, no ment in the AIMCO Operating Partnership. However, the
limited partner will, except as otherwise required by limitations on the liability of limited partners for
applicable law, be required to make any further capital the obligations of a limited partnership have not been
contributions or lend any funds to your partnership. clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, partnership funds may not be commingled partnership agreement, Delaware law generally requires
with the funds of any other person except as provided a general partner of a Delaware limited partnership to
in the partnership agreement, and further, the general adhere to fiduciary duty standards under which it owes
partner has fiduciary responsibility for the its limited partners the highest duties of good faith,
safekeeping and use of all funds and assets of the fairness and loyalty and which generally prohibit such
partnership, whether or not in the immediate possession general partner from taking any action or engaging in
or control of the general partner, and the general any transaction as to which it has a conflict of
partner may not employ nor permit another to employ interest. The AIMCO Operating Partnership Agreement
such funds or assets in any manner except for the expressly authorizes the general partner to enter into,
exclusive benefit of the partnership. Your general on behalf of the AIMCO Operating Partnership, a right
partner may engage in or possess an interest in any of first opportunity arrangement and other conflict
other business or venture of every nature and avoidance agreements with various affiliates of the
description, independently or with others, including AIMCO Operating Partnership and the general partner, on
the ownership, financing, leasing, operation, such terms as the general partner, in its sole and
management, brokerage and development of real property. absolute discretion, believes are advisable. The AIMCO
Operating Partnership Agreement expressly limits the
liability of the general partner by providing that the
general partner, and its officers and directors will
not be liable or accountable in damages to the AIMCO
Operating Partnership, the limited partners or
assignees for errors in judgment or mistakes of fact or
law or of any act or omission if the general partner or
such director or officer acted in good faith. See
"Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
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<PAGE> 1362
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; extend the term of Prospectus. So long as any institution of bankruptcy
your partnership, remove or elect a Preferred OP Units are outstand- proceedings, an assignment for the
general partner; and approve or ing, in addition to any other vote benefit of creditors and certain
disapprove the sale of all or or consent of partners required by transfers by the general partner of
substantially all of the assets of law or by the AIMCO Operating its interest in the AIMCO Operating
your partnership. Partnership Agreement, the Partnership or the admission of a
affirmative vote or consent of successor general partner.
A general partner may cause the holders of at least 50% of the
dissolution of your partnership by outstanding Preferred OP Units will Under the AIMCO Operating Partner-
retiring. Your partnership may be be necessary for effecting any ship Agreement, the general partner
continued by the remaining general amendment of any of the provisions has the power to effect the
partner or, if none, the limited of the Partnership Unit Desig- acquisition, sale, transfer,
partners may agree to continue your nation of the Preferred OP Units exchange or other disposition of
partnership by electing a successor that materially and adversely any assets of the AIMCO Operating
general partner upon the vote of affects the rights or preferences Partnership (including, but not
the limited partners owning a of the holders of the Preferred OP limited to, the exercise or grant
majority of the units within 120 Units. The creation or issuance of of any conversion, option,
days after the retirement of the any class or series of partnership privilege or subscription right or
general partner. units, including, without any other right available in
limitation, any partnership units connection with any assets at any
that may have rights senior or time held by the AIMCO Operating
superior to the Preferred OP Units, Partnership) or the merger,
shall not be deemed to materially consolidation, reorganization or
adversely affect the rights or other combination of the AIMCO
preferences of the holders of Operating Partnership with or into
Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations, sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
The distributions payable to the $ per Preferred OP Unit; tribute quarterly all, or such
partners are not fixed in amount provided, however, that at any time portion as the general partner may
and depend upon the operating and in its sole and abso-
</TABLE>
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<PAGE> 1363
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
results and net sales or from time to time on or after the lute discretion determine, of
refinancing proceeds available from fifth anniversary of the issue date Available Cash (as defined in the
the disposition of your of the Preferred OP Units, the AIMCO Operating Partnership
partnership's assets. AIMCO Operating Partnership may Agreement) generated by the AIMCO
adjust the annual distribution rate Operating Partnership during such
on the Preferred OP Units to the quarter to the general partner, the
lower of (i) % plus the annual special limited partner and the
interest rate then applicable to holders of Common OP Units on the
U.S. Treasury notes with a maturity record date established by the
of five years, and (ii) the annual general partner with respect to
dividend rate on the most recently such quarter, in accordance with
issued AIMCO non-convertible their respective interests in the
preferred stock which ranks on a AIMCO Operating Partnership on such
parity with its Class H Cumu- record date. Holders of any other
lative Preferred Stock. Such Preferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may assign one or There is no public market for the There is no public market for the
more whole units by a written Preferred OP Units and the OP Units. The AIMCO Operating Part-
instrument in accordance with your Preferred OP Units are not listed nership Agreement restricts the
partnership's agreement of limited on any securities exchange. The transferability of the OP Units.
partnership. In order for an Preferred OP Units are subject to Until the expiration of one year
assignee to become a substituted restrictions on transfer as set from the date on which an OP
limited partner the following forth in the AIMCO Operating Unitholder acquired OP Units,
conditions must first be satisfied: Partnership Agreement. subject to certain exceptions, such
(1) the filing with the partnership OP Unitholder may not transfer all
of a written instrument of as- Pursuant to the AIMCO Operating or any portion of its OP Units to
signment covering no less than 10 Partnership Agreement, until the any transferee without the consent
units; (2) the execution by the expiration of one year from the of the gen-
assignor and date on which a holder
</TABLE>
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<PAGE> 1364
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
assignee of any other documentation of Preferred OP Units acquired eral partner, which consent may be
required or requested by the Preferred OP Units, subject to withheld in its sole and absolute
general partner; (3) the written certain exceptions, such holder of discretion. After the expiration of
consent of the general partner is Preferred OP Units may not transfer one year, such OP Unitholder has
obtained; and (4) a transfer fee all or any portion of its Pre- the right to transfer all or any
covering all reasonable expenses ferred OP Units to any transferee portion of its OP Units to any
connected with such substitution is without the consent of the general person, subject to the satisfaction
paid to the partnership. partner, which consent may be of certain conditions specified in
withheld in its sole and absolute the AIMCO Operating Partnership
discretion. After the expiration of Agreement, including the general
one year, such holders of Preferred partner's right of first refusal.
OP Units has the right to transfer See "Description of OP Units --
all or any portion of its Preferred Transfers and Withdrawals" in the
OP Units to any person, subject to accompanying Prospectus.
the satisfaction of certain
conditions specified in the AIMCO After the first anniversary of
Operating Partnership Agreement, becoming a holder of Common OP
including the general partner's Units, an OP Unitholder has the
right of first refusal. right, subject to the terms and
conditions of the AIMCO Operating
After a one-year holding period, a Partnership Agreement, to require
holder may redeem Preferred OP the AIMCO Operating Partnership to
Units and receive in exchange redeem all or a portion of the
therefor, at the AIMCO Operating Common OP Units held by such party
Partnership's option, (i) subject in exchange for a cash amount based
to the terms of any Senior Units, on the value of shares of Class A
cash in an amount equal to the Common Stock. See "Description of
Liquidation Preference of the OP Units -- Redemption Rights" in
Preferred OP Units tendered for the accompanying Prospectus. Upon
redemption, (ii) a number of shares receipt of a notice of redemption,
of Class I Cumulative Preferred the AIMCO Operating Partnership
Stock of AIMCO that pay an may, in its sole and absolute
aggregate amount of dividends yield discretion but subject to the
equivalent to the distributions on restrictions on the ownership of
the Preferred OP Units tendered for Class A Common Stock imposed under
redemption and are part of a class AIMCO's charter and the transfer
or series of preferred stock that restrictions and other limitations
is then listed on the New York thereof, elect to cause AIMCO to
Stock Exchange or another national acquire some or all of the tendered
securities exchange, or (iii) a Common OP Units in exchange for
number of shares of Class A Common Class A Common Stock, based on an
Stock of AIMCO that is equal in exchange ratio of one share of
Value to the Liquidation Preference Class A Common Stock for each Com-
of the Preferred OP Units tendered mon OP Unit, subject to adjustment
for redemption. The Preferred OP as provided in the AIMCO Operating
Units may not be redeemed at the Partnership Agreement.
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 1365
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 1366
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 1367
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee equal to 5% of your
partnership's cash available for distribution for its services as general
partner and may receive reimbursement for expenses generated in such capacity.
The general partner received fees and reimbursements totaling $154,000 in 1996,
$135,000 in 1997 and $55,000 for the first six months of 1998. The property
manager received management fees of $132,000 in 1996, $142,000 in 1997 and
$74,000 for the first six months of 1998. The AIMCO Operating Partnership has no
current intention of changing the fee structure for the manager of your
partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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YOUR PARTNERSHIP
GENERAL
Century Properties Fund XVI was organized on December 30, 1980, under the
laws of the State of California. Its primary business is real estate ownership
and related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following two residential
apartment complexes: The Landings Apartments, a 200-unit complex in Tampa,
Florida; and Woods at Inverness Apartments, a 272-unit complex in Houston,
Texas. The general partner of your partnership is Fox Capital Management
Corporation, which is a majority-owned subsidiary of AIMCO. The executive
officers and directors of the general partner are the same as those of the AIMCO
GP, which are set forth in Appendix B hereto. NPI-AP Management, L.P., which is
a majority-owned subsidiary of AIMCO, serves as manager of the properties owned
by your partnership. As of June 30, 1998, there were 130,000 units issued and
outstanding, which were held of record by 5,534 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
In a prospectus dated August 17, 1981, your general partner (which was not
then affiliated with us) indicated that your partnership plans to hold its
properties for approximately five to seven years since the appreciation in the
value of such property and accelerated depreciation is optimized during such
time frame. Under your partnership's agreement of limited partnership, the term
of the partnership will continue until December 31, 2025, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each
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asset's operating performance and continuously evaluates the physical
improvement requirements. In addition, the financing structure for each
property, tax implications and the investment climate are all considered. Any of
these factors, and possibly others, could potentially contribute to any decision
by the general partner to sell, refinance, upgrade with capital improvements or
hold a particular partnership property. Based on the above considerations, the
general partner has determined that it is not in the best interests of limited
partners to sell or refinance any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Your partnership does not limit
the liability of the general partner or its affiliates to your partnership or
the limited partners for acts undertaken on behalf your partnership. The general
partner of your partnership is majority-owned by AIMCO. See "Conflicts of
Interest".
Your general partner and any of its affiliates are entitled to
indemnification for any liability, loss or damage incurred by them or by the
partnership by reason of any act performed or omitted to be performed by them in
connection with the business of the partnership, including costs and attorney's
fees and any amounts expended in the settlements of any claims of liability
provided that if such liability arises out of any action or inaction of the
general partner such conduct did not constitute fraud, negligence, breach of
fiduciary duty or misconduct by the general partner. All judgments against the
partnership and the general partner, wherein the general partner is entitled to
indemnification, must first be satisfied from partnership assets before the
general partner is responsible for these obligations. Notwithstanding the above
paragraph, neither the general partner, nor any affiliate of the general partner
or the partnership, will be indemnified from any liability incurred by them in
connection with (1) any claim or settlement involving allegations that the
securities laws were violated by the general partner or by any such other person
unless: (a) the general partner or other persons or entities seeking
indemnification are successful in defending such action, and (b) such
indemnification is specifically approved by a court of law which is advised as
to the current position of any relevant regulatory agencies regarding
indemnification for securities law violations; or (2) any liability imposed by
law, including liability for fraud, bad faith or negligence.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
DISTRIBUTIONS
Your partnership did not make distributions in 1996 and 1997 and is not
expected to make distributions in 1998. The original cost per unit was $500.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 38.5% interest in your partnership, including 47,418.68 units held by us, and
the interest held by Fox Capital Management Corporation and Fox Realty
Investors, as general partners of your partnership. Except as set forth above,
neither the AIMCO Operating Partnership, nor, to the best of its knowledge, any
of its affiliates, (i) beneficially own or have a right to acquire any units,
(ii) have effected any transactions in the units in the past 60 days, or (iii)
have any contract, arrangement, understanding or relationship with any other
person with respect to any securities of your partnership, including, but not
limited to, contracts, arrangements,
S-78
<PAGE> 1376
understandings or relationships concerning transfer or voting thereof,
joint ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $147,000
1995........................................................ 182,000
1996........................................................ 154,000
1997........................................................ 135,000
1998 (through June 30)...................................... 55,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- --------
<S> <C>
1994........................................................ $103,000
1995........................................................ 132,000
1996........................................................ 132,000
1997........................................................ 142,000
1998 (through June 30)...................................... 74,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative
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<PAGE> 1377
0.25% and positive 0.5% in the case of base rate loans, depending upon a
ratio of the AIMCO Operating Partnership's consolidated unsecured indebtedness
to the value of certain unencumbered assets. The credit facility matures on
October 1, 1999 unless extended, at the discretion of the lenders. The credit
facility provides for the conversion of the revolving facility into a three year
term loan. The availability of funds to the AIMCO Operating Partnership under
the credit facility is subject to certain borrowing base restrictions and other
customary restrictions, including compliance with financial and other covenants
thereunder. The financial covenants require the AIMCO Operating Partnership to
maintain a ratio of debt to gross asset value of no more than 0.55 to 1.0, an
interest coverage ratio of 2.25 to 1.0 and a fixed charge coverage ratio of at
least 1.6 to 1.0 through December 31, 1998, 1.7 to 1.0 from January 1, 1999
through June 30, 1999, and 1.8 to 1.0 thereafter. In addition, the credit
facility limits the AIMCO Operating Partnership from distributing more than 80%
of its Funds From Operations (as defined) to holders of OP Units, imposes
minimum net worth requirements and provides other financial covenants related to
certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements Century Properties Fund XVI appearing
in Century Properties Fund XVI Annual Report (Form 10-KSB) for the year ended
December 31, 1997, have been audited by Imowitz Koenig & Co., LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
S-80
<PAGE> 1378
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: Century Properties Fund XVI
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
Century Properties Fund XVI (the "Partnership") (the Purchaser, AIMCO, the
General Partner and other affiliates and subsidiaries of AIMCO are referred to
herein collectively as the "Company"), is contemplating a transaction (the
"Offer") in which a minority of the outstanding limited partnership interests in
the Partnership (the "Units") will be acquired by the Purchaser in exchange for
an offer price per Unit of $ in cash, or Common OP Units of the
Purchaser, or Preferred OP Units of the Purchaser, or a combination of
any of such forms of consideration. The limited partners of the Partnership (the
"Limited Partners") will have the choice to maintain their current interest in
the Partnership or exchange their Units for any or a combination of such forms
of consideration. The amount of cash, Common OP Units or Preferred OP Units
offered per Unit is referred to herein as the "Offer Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
A-1
<PAGE> 1379
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of the Partnership's Properties or the sale or
transfer of a material amount of the Partnership's other assets; any changes to
the Partnership's senior management or personnel or their compensation; any
changes in the
A-2
<PAGE> 1380
Partnership's present capitalization or distribution policy; or any other
material changes in the Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 1381
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership and the directors of AIMCO, are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1382
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1383
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1384
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1385
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1386
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1387
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CENTURY PROPERTIES FUND XVIII
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of December 31, 1996, an affiliate of
your general partner estimated the net asset value of your units to be
$100 per unit and as of September 30, 1997, an affiliate of your general
partner estimated the net liquidation value of your units to be $120.83
per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in two apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1388
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Century
Properties Fund XVIII...................... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-30
Background of the Offer...................... S-30
Alternatives Considered...................... S-31
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-49
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-52
Comparison of Consideration to Alternative
Consideration.............................. S-52
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-56
Summary of Materials Considered.............. S-56
Summary of Reviews........................... S-57
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-64
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
</TABLE>
i
<PAGE> 1389
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-77
Originally Anticipated Term of the
Partnership................................ S-77
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-77
Property Management.......................... S-78
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-78
Distributions................................ S-79
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-79
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-80
LEGAL MATTERS.................................. S-80
EXPERTS........................................ S-81
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1390
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Century Properties Fund XVIII. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Fox Partners, the managing
general partner of your partnership (the "general partner"), and the
company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1391
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1392
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $9.80 per unit for the six months
ended June 30, 1998 (equivalent to $ on an annual basis). We will pay
fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1393
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, the market for
your units may be limited.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership. In addition, if there is a sale or exchange of 50% or more of
the total interest in capital and profits of your partnership within any
12-month period, including sales or exchanges resulting from the offer,
your partnership will terminate for federal income tax purposes. Any such
termination may, among other things, subject the assets of your partnership
to longer depreciable lives than those currently applicable to the assets
of your partnership. This would generally decrease the annual average
depreciation deductions allocable to you if you do not tender all of your
units (thereby increasing the taxable income allocable to your units each
year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership. Any such
termination may also change (and possibly shorten) your holding period with
respect to your units that you choose to retain.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF THE OFFER. THIS SUMMARY DOES NOT DISCUSS ALL
ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF
YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE
OFFER TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX
SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR
TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE
OFFER.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $1.00 per unit to $190.00 per unit
over the period from January 1, 1997 through September 30, 1998. As of
December 31, 1996, an affiliate of your general partner estimated the net
asset value of your units to be $100.00 per unit and as of September 30,
1997, an affiliate of your general partner estimated the net liquidation
value of your units to be $120.83 per unit. However, we do not believe that
these valuations represent the current fair market value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your
S-4
<PAGE> 1394
partnership using the direct capitalization method. This method involves
applying a capitalization rate to your partnership's annual net operating
income. We determined an appropriate capitalization rate using our best
judgment, but our valuation is just an estimate. Although the direct
capitalization method is a widely-accepted way of valuing real estate,
there are a number of other methods available to value real estate, each of
which may result in different valuations of the property. The proceeds that
you would receive if you sold your units to someone else or if your
partnership were actually liquidated might be higher or lower than our
offer consideration. An actual liquidation may also result in your paying
taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of 5
units (except for units held by IRAs and Keogh Plans). You may tender
fractional units only if you are tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However,
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we reserve the right to extend, terminate or amend the offer and, under
certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
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SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of September
30, 1997, an affiliate of your general partner estimated the net liquidation
value of your units to be $120.83 per unit. However, we do not believe that
these valuations represent the current fair market value of your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $1.00 per unit to $190.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
In addition, if there is a sale or exchange of 50% or more of the total
interest in capital and profits of your partnership within any 12-month period,
including sales or exchanges resulting from the offer, your partnership will
terminate for federal income tax purposes. Any such termination may, among other
things, subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
if you do not tender all of your units (thereby increasing the taxable income
allocable to your units each year), but would have no effect on the total
depreciation deductions available over the useful lives of the assets of your
partnership. Any such termination may also change (and possibly shorten) your
holding period with respect to your units that you chose to retain.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of
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<PAGE> 1398
all of your units in your partnership, and whether the "passive loss" rules
apply to your investments. Because the income tax consequences of an exchange of
units will not be the same for everyone, you should consult your tax advisor
before determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence
S-9
<PAGE> 1399
on matters affecting the operation of the AIMCO Operating Partnership and third
parties may find it difficult to attempt to gain control or influence the
activities of our operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although
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<PAGE> 1400
these agreements provide us with some protection against rising interest rates,
these agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
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POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
35.6% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of
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<PAGE> 1402
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-13
<PAGE> 1403
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
S-14
<PAGE> 1404
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
S-15
<PAGE> 1405
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 1406
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $1 to $190
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 1407
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner. Also, your partnership is limited as to the number of limited partner
interests it may issue while the AIMCO Operating Partnership has no such
limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to 9% of your partnership's cash available for
distributions for its services as general partner and may receive reimbursement
for expenses generated in such capacity. For the first six months of 1998, the
general partner received $64,000 in such fees and reimbursements. The property
manager received management fees of $120,000 for the first six months of 1998.
We have no current intention of changing the fee structure for your property
manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Century Properties Fund XVIII was organized on July 16, 1982, under the
laws of the State of California. Its primary business is real estate ownership
and related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation
S-18
<PAGE> 1408
and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following two residential
apartment complexes: Overlook Apartments, a 304-unit complex in Salt Lake City,
Utah and Oak Run Apartments, a 420-unit complex in Dallas, Texas. The general
partner of your partnership is Fox Partners, which is a majority-owned
subsidiary of AIMCO. NPI-AP Management, L.P., which is a majority-owned
subsidiary of AIMCO, serves as manager of the properties owned by your
partnership. As of December 31, 1997, there were 75,000 units of limited
partnership interest issued and outstanding, which were held of record by 4,817
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1409
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1410
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1411
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1412
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1413
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1414
SUMMARY FINANCIAL INFORMATION OF CENTURY PROPERTIES FUND XVIII
The summary financial information of Century Properties Fund XVIII for the
six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Century Properties Fund XVIII for the years ended December 31,
1997 and 1996, 1995 and 1994 is based on audited financial statements. This
information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
CENTURY PROPERTIES FUND XVIII
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------- -------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues........................................ $ 2,424 $ 2,435 $ 4,917 $ 4,737 $ 4,543
Net Income (Loss)..................................... 255 313 457(A) 146 (4)
Net Income (Loss) per limited partnership unit........ 3.07 3.76 6.79 1.79 (0.05)
Distributions per limited partnership unit............ 9.81 -- 8.57 -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- ----------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation.......... $16,911 $17,335 $17,082 $17,611 $18,065
Total Assets.......................................... 19,545 19,654 19,508 19,705 19,840
Notes Payable......................................... 18,457 18,461 18,550 18,675 19,127
Partners' Capital (Deficit)........................... (134) 752 354 439 293
</TABLE>
- -------------------------
(A) Net income before extraordinary items.
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CENTURY PROPERTIES
PARTNERSHIP FUND XVIII
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding............ $1.125 $1.85 $9.81 $8.57
</TABLE>
S-25
<PAGE> 1415
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $1.00 per unit to
$190.00 per unit over a period from January 1, 1997 through September 30, 1998.
As of December 31, 1996, an affiliate of your general partner estimated the net
asset value of your units to be $100.00 per unit. However, we do not believe
that these valuations represent the current fair market value of your units. We
have retained Stanger to conduct an analysis of our offer and to render an
opinion as to the fairness to you of our offer consideration from a financial
point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of September 30, 1997, an affiliate of your general
partner estimated the net liquidation value of your units to be $120.83 per
unit. However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 1416
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
In addition, if there is a sale or exchange of 50% or more of the total
interest in capital and profits of your partnership within any 12-month period,
including sales or exchanges resulting from the offer, your partnership will
terminate for federal income tax purposes. Any such termination may, among other
things, subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
if you do not tender all of your units (thereby increasing the taxable income
allocable to your units each year), but would have no effect on the total
depreciation deductions available over the useful lives of the assets of your
partnership. Any such termination may also change (and possibly shorten) your
holding period with respect to your units that you choose to retain.
S-27
<PAGE> 1417
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the six months ended June 30, 1998
were $9.80 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
S-28
<PAGE> 1418
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
POSSIBLE TERMINATION OF YOUR PARTNERSHIP FOR FEDERAL INCOME TAX
PURPOSES. If there is a sale or exchange of 50% or more of the total interest in
capital and profits of your partnership within any 12-month period, including
sales or exchanges resulting from the offer, your partnership will terminate for
federal income tax purposes. Any such termination may, among other things,
subject the assets of your partnership to longer depreciable lives than those
currently applicable to the assets of your partnership. This would generally
decrease the annual average depreciation deductions allocable to you if you do
not tender all of your units (thereby increasing the taxable income allocable to
your units each year), but would have no effect on the total depreciation
deductions available over the useful lives of the assets of your partnership.
Any such termination may also change (and possibly shorten) your holding period
with respect to your units that you choose to retain.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
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BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in NPI-AP Management, L.P.,
which manages the properties owned by your partnership. Through subsidiaries,
AIMCO currently owns, in the aggregate, approximately a 35.6% interest in your
partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In December 1997, Madison River Properties,
L.L.C., then an affiliate of Insignia and now our affiliate, commenced a tender
offer pursuant to which it acquired 5,259.5 units (representing approximately
7.0% of the number outstanding) at a cash purchase price of $70 per unit on
January 30, 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
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<PAGE> 1420
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
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<PAGE> 1421
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 1422
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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<PAGE> 1423
, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of 5 units (except for units held by IRAs and Keogh Plans). You
may tender fractional units only if you are tendering all of your units. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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<PAGE> 1424
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
S-35
<PAGE> 1425
Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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<PAGE> 1426
Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings, approvals or other actions by or with any
domestic or foreign governmental authority or administrative or regulatory
agency that would be required prior to the acquisition of units by the AIMCO
Operating Partnership pursuant to the offer as contemplated herein, other than
the filing with the SEC of a Tender Offer Statement on Schedule 14D-1 and any
amendments required thereto. While there is no present intent to delay the
purchase of units tendered pursuant to the offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
your partnership's business, or that certain parts of your partnership's
business might not have to be disposed of or other substantial conditions
complied with in order to obtain such approval or action, any of which could
cause the AIMCO Operating Partnership to elect to terminate the offer without
purchasing units hereunder. The AIMCO Operating Partnership's obligation to
purchase and pay for units is subject to certain conditions, including
conditions related to the legal matters discussed in this section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
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Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have filed an amended complaint. On October
14, 1998, the AIMCO and Insignia defendants filed demurrers to the amended
complaint. The demurrers are scheduled to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate
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compensatory damages to exceed $15 million. A response to the complaint was
filed by the defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
S-46
<PAGE> 1436
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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<PAGE> 1437
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
CERTAIN TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING OFFEREES
Section 708 of the Code provides that if there is a sale or exchange of 50%
or more of the total interest in capital and profits of a partnership within any
12-month period, such partnership terminates for federal income tax purposes (a
"Termination"). It is possible that the AIMCO Operating Partnership's
acquisition of units pursuant to the offer could result in a Termination of your
partnership. If a purchase of units results in a Termination, the following
federal income tax events will be deemed to occur with respect to such
Termination: the terminated Partnership (the "Old Partnership") will be deemed
to have contributed all of its assets (subject to its liabilities) (the
"Hypothetical Contribution") to a new partnership (the "New Partnership") in
exchange for an interest in the New Partnership and, immediately thereafter, the
Old Partnership will be deemed to have distributed interests in the New
Partnership (the "Hypothetical Distribution") to the AIMCO Operating Partnership
and offerees who do not tender all of their units
a "Remaining Offeree") in proportion to their respective interests in the Old
Partnership in liquidation of the Old Partnership.
A Remaining Offeree will not recognize any gain or loss upon the
Hypothetical Distribution or upon the Hypothetical Contribution and the capital
accounts of the Remaining Offerees in the Old Partnership will carry over intact
into the New Partnership. Any Termination may change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes.
The New Partnership's adjusted tax basis in its assets will carry over from
the Old Partnership's basis in such assets immediately before the Termination.
Any Termination may also subject the assets of the New Partnership to
depreciable lives in excess of those currently applicable to the Old
Partnership. This would generally decrease the annual average depreciation
deductions allocable to the Remaining Offerees following consummation of the
Offer (thereby increasing the taxable income allocable to their retained units
each year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership.
Section 704(c) of the Code will apply to future allocation of income, gain,
loss and deductions with respect to any New Partnership assets among the AIMCO
Operating Partnership and the Remaining Offerees following the consummation of
the offer only to the extent that such assets were Section 704(c) property in
the hands of the Old Partnership immediately prior to the Hypothetical
Contribution. Moreover, subject to the Code's anti-abuse regulations, the New
Partnership will not be required to apply the same Section 704(c) allocation
method applied by the Old Partnership. The Hypothetical Contribution will not
trigger a new five-year holding period for purposes of measuring
post-contribution appreciation of assets for the offeree who contributed such
assets.
Elections as to certain tax matters previously made by the Old Partnership
prior to Termination will not be applicable to the New Partnership unless the
New Partnership chooses to make the same decisions.
Additionally, upon a Termination, the Old partnership's taxable year will
close for all offerees. In the case of a Remaining Offeree reporting on a tax
year other than a calendar year, the closing of your partnership's taxable year
may result in more than 12 months' taxable income or loss of the Old Partnership
being includible in such Offeree's taxable income for the year of Termination.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
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<PAGE> 1438
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive at gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
- ------------------------------------------- ---------------- -------------- --------------
<S> <C> <C> <C>
Overlook Apartments........................ $ % $
Oak Run Apartments.........................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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<PAGE> 1439
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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<PAGE> 1440
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Distributions with respect to your units for the six months ended
June 30, 1998 were $9.80 (equivalent to $ on an annualized basis).
Therefore, distributions with respect to the Preferred OP Units and Common
OP Units that we are offering are expected to be , immediately
following our offer, than the distributions with respect to your units. See
"Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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<PAGE> 1441
partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-52
<PAGE> 1442
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $1.00 to $190.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 5,739.5 units (representing less than 7.65%
of the total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
period from January 1, 1996 to September 30, 1998, as reported by the general
partner and by The Partnership Spectrum, which is an independent, third-party
source. The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported prices; thus the AIMCO Operating
Partnership does not know whether the information compiled by The Partnership
Spectrum is accurate or complete. The transfer paperwork submitted to the
general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
CENTURY PROPERTIES FUND XVIII
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $56.00 $ 70.00 (c) (c)
Second Quarter.................................. 51.00 51.00 -- --
First Quarter................................... 15.00 67.00 -- --
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 1.00 190.00 -- --
Third Quarter................................... 2.00 55.00 $56.00 $59.00
Second Quarter.................................. 31.00 49.03 49.00 49.00
First Quarter................................... 3.42 46.50 39.00 50.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. N/A N/A 20.00 36.00
Third Quarter................................... N/A N/A 29.00 34.00
Second Quarter.................................. N/A N/A 23.00 23.00
First Quarter................................... N/A N/A -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the
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<PAGE> 1443
first day of each month. The prices in the table are based solely on
information provided to the general partner by sellers and buyers of units
transferred in sale transactions (i.e., excluding transactions believed to
result from the death of a limited partner, rollover to an IRA account,
establishment of a trust, trustee to trustee transfers, termination of a
benefit plan, distributions from a qualified or non-qualified plan, uniform
gifts, abandonment of units or similar non-sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Oak Run Apartments was appraised in July 1997 by an
independent, third party appraiser, Koeppel Tenner Real Estate Services, Inc.
(the "Appraiser"), in connection with a refinancing of the property. According
to the appraisal report, the scope of the appraisal included an inspection of
the property and an analysis of the surrounding market. The Appraiser relied
principally on the income capitalization approach to valuation and secondarily
on the sales comparison approach, and represented that its report was prepared
in accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the Appraisal Standards
set forth in the Financial Institutions Reform, Recovery and Enforcement Act
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<PAGE> 1444
of 1989 (known as "FIRREA"). The estimated market value of the fee simple
estate of the property specified in that appraisal report was $15,100,000. A
copy of the summary of the appraisal has been filed as an exhibit to the AIMCO
Operating Partnership's Tender Offer Statement on Schedule 14D-1 filed with the
SEC. Independent appraisals have not been conducted for any of the partnership's
other properties in the past three years.
Estimate of Net Asset Value in Connection with Insignia Property Trust
Formation. In connection with the formation of Insignia Property Trust, Insignia
Financial Group, Inc. ("Insignia") prepared estimates of the value of your
partnership's properties and of a unit as of December 31, 1996. Insignia
estimated the aggregate value of your partnership properties to be $25,033,052
and the asset value of a unit to be $100. However, since December 1996, the
operating performance of your partnership's properties have changed, the current
assets of your partnership has changed and your partnership's properties have
increased in value. Therefore, the AIMCO Operating Partnership believes that
this estimate of net asset value per unit does not necessarily represent either
the fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Liquidation Value in Connection with the Previous Tender
Offer by an Affiliate. In connection with the December 1997 tender offer by an
affiliate of your general partner, the affiliate estimated the net liquidation
value of a unit (as of September 30, 1997) to be $120.83. This net liquidation
value estimate was based on a hypothetical sale of all of your partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the partnership's cash, proceeds from temporary investments, and all other
assets that are believed to have liquidation value, after provision in full for
all of the partnership's other known liabilities. This net liquidation value
estimate did not take into account (i) timing considerations or (ii) costs
associated with winding up your partnership. Therefore, the AIMCO Operating
Partnership believes that this estimate of the net liquidation value of a unit
does not necessarily represent either the fair market value of a unit or the
amount a limited partner reasonably could expect to receive if the partnership's
properties were sold and the partnership was liquidated. For this reason, the
AIMCO Operating Partnership considered this net liquidation value estimate to be
less meaningful in determining the offer consideration than the analysis
described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its
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entirety. The summary set forth herein does not purport to be a complete
description of the review performed by Stanger in rendering the Fairness
Opinion. Arriving at a fairness opinion is a complex process not necessarily
susceptible to partial analysis or amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
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SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure
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and replacement reserve requirements, the determination and valuation of
non-real estate assets and liabilities of your partnership, the allocation of
your partnership's net values between the general partner, special limited
partner and limited partners of your partnership, the terms and conditions of
any debt encumbering the partnership's properties, and the transaction costs and
fees associated with a sale of the properties. Stanger also relied upon the
assurance of your partnership, AIMCO, and the management of the partnership's
properties that any financial statements, budgets, pro forma statements,
projections, capital expenditure estimates, debt, value estimates and other
information contained in this Prospectus Supplement or provided or communicated
to Stanger were reasonably prepared and adjusted on bases consistent with actual
historical experience, are consistent with the terms of your partnership's
agreement of limited partnership, and reflect the best currently available
estimates and good faith judgments; that no material changes have occurred in
the value of the partnership's properties or other balance sheet assets and
liabilities or other information reviewed between the date of such information
provided and the date of the Fairness Opinion; that your partnership, AIMCO, and
the management of the partnership's properties are not aware of any information
or facts that would cause the information supplied to Stanger to be incomplete
or misleading; that the highest and best use of the partnership's properties is
as improved; and that all calculations were made in accordance with the terms of
your partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Cash Available For Distribution (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2007. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership was formed to invest in, acquire, The purpose of the AIMCO Operating Partnership is to
manage and ultimately sell income producing real conduct any business that may be lawfully conducted by
properties which are improved or capable of improvement a limited partnership organized pursuant to the
or which will be improved within a reasonable period Delaware Revised Uniform Limited Partnership Act (as
after acquisition and to make, service and ultimately amended from time to time, or any successor to such
dispose of mortgage loans on income producing real statute) (the "Delaware Limited Partnership Act"),
properties. Your partnership may enter into ventures, provided that such business is to be conducted in a
partnerships, REITs and other business arrangements manner that permits AIMCO to be qualified as a REIT,
with respect to real estate deemed prudent by the unless AIMCO ceases to qualify as a REIT. The AIMCO
general partner in order to promote the business of the Operating Partnership is authorized to perform any and
partnership, subject, however, to the provision of your all acts for the furtherance of the purposes and
partnership's agreement of limited partnership. business of the AIMCO Operating Partnership, provided
Additionally, your partnership may engage in any other that the AIMCO Operating Partnership may not take, or
business or do any and all acts and things which may be refrain from taking, any action which, in the judgment
necessary, incidental or convenient to carry on the of its general partner could (i) adversely affect the
partnership's purpose and business as specified above. ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 75,000 units for cash time to the limited partners and to other persons, and
to selected persons who fulfill the requirements set to admit such other persons as additional limited
forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. However, after November 5, No action or consent by the OP Unitholders is required
1983, the general partner is prohibited from admit- in connection with the admission of any additional OP
ting any additional limited partners. Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your general partner may not enter into a funds or other assets to its subsidiaries or other
contract with your partnership that would bind the persons in which it has an equity investment, and such
partnership after the removal of the general partner. persons may borrow funds from the AIMCO Operating
Your general partner may not grant itself or an Partnership, on terms and conditions established in the
affiliate an exclusive listing for the sale of sole and absolute discretion of the general partner. To
partnership assets, purchase or lease real property the extent consistent with the business purpose of the
from the partnership, or sell or lease real property in AIMCO Operating Partnership and the permitted
which the general partner has an interest to the activities of the general partner, the AIMCO Operating
partnership. Your partnership may not lend money to the Partnership may transfer assets to joint ventures,
general partner. The general partner may not make limited liability companies, partnerships,
long-term secured loans to your partners and, on corporations, business trusts or other business
short-term unsecured loans made to your partnership, entities in which it is or thereby becomes a
may not receive interest or other financing charges or participant upon such terms and subject to such
fees in excess of those amounts which would be charged conditions consistent with the AIMCO Operating Part-
by third party financing institutions on comparable nership Agreement and applicable law as the general
loans for the same purpose in the same geographic area partner, in its sole and absolute discretion, believes
(such interest rate per annum will not exceed 2% above to be advisable. Except as expressly permitted by the
the prime rate as charged by Bank of America, N.T. & AIMCO Operating Partnership Agreement, neither the
S.A.). Unless certain conditions are satisfied, the general partner nor any of its affiliates may sell,
general partner may not issue a wrap-around note or transfer or convey any property to the AIMCO Operating
mortgage to your partnership to finance the purchase of Partnership, directly or indirectly, except pursuant to
property. The general partner may not receive any transactions that are determined by the general partner
insurance brokerage fees for issuing any insurance in good faith to be fair and reasonable.
policy to your partnership or any commission for the
placement of mortgages or trust deed loans on your
partnership's properties. Your general partner may not
cause your partnership to enter into any contract with
the general partner to construct or develop properties
or to render any services in connection with such
construction or development. Your general partner may
not cause your partnership to enter into any
transaction with any other real estate program in which
the general partner or any affiliate has an interest.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money, establish a line of credit and issue restrictions on borrowings, and the general partner has
evidences of indebtedness in furtherance of any of the full power and authority to borrow money on behalf of
purposes of your partnership and to secure such debt by the AIMCO Operating Partnership. The AIMCO Operating
mortgage, pledge or other lien on any of the assets of Partnership has credit agreements that restrict, among
your partnership. Your partnership may not incur long- other things, its ability to incur
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
term secured indebtedness with respect to a property of indebtedness. See "Risk Factors -- Risks of Significant
your partnership which exceeds 80% of the then Indebtedness" in the accompanying Prospectus.
appraised value of such property.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
provides that a limited partner upon written request, with a statement of the purpose of such demand and at
after payment of the reasonable expense of duplication such OP Unitholder's own expense, to obtain a current
and for any proper purpose, will be sent a copy of the list of the name and last known business, residence or
certificate or certificates of limited partnership mailing address of the general partner and each other
containing the most recent listing of limited partner OP Unitholder.
names, addresses and capital contributions.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership, subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership. No the right to vote on certain matters described under
limited partner has any authority or right to act for "Comparison of Ownership of Your Units and AIMCO OP
or bind your partnership or participate in or have any Units -- Voting Rights" below. The general partner may
control over your partnership business except as not be removed by the OP Unitholders with or without
required by law. cause.
In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Your general partner and any of its affiliates are Notwithstanding anything to the contrary set forth in
entitled to indemnification for any liability, loss or the AIMCO Operating Partnership Agreement, the general
damage incurred by them or by the partnership by reason partner is not liable to the AIMCO Operating
of any act performed or omitted to be performed by them Partnership for losses sustained, liabilities incurred
in connection with the business of the partnership, or benefits not derived as a result of errors in
including costs and attorney's fees and any amounts judgment or mistakes of fact or law of any act or
expended in the settlements of any claims of liability omission if the general partner acted in good faith.
provided that if such liability arises out of any The AIMCO Operating Partnership Agreement provides for
action or inaction of the general partner such course indemnification of AIMCO, or any director or officer of
of conduct did not constitute fraud, negligence or AIMCO (in its capacity as the previous general partner
misconduct by the general partner. All judgments of the AIMCO Operating Partnership), the general
against the partnership and the general partner, partner, any officer or director of general partner or
wherein the general partner is entitled to the AIMCO Operating Partnership and such other persons
indemnification, must first be satisfied from as the general partner may designate from and against
partnership assets before the general partner is all losses, claims, damages, liabilities, joint or
responsible for these obligations. Notwithstanding the several, expenses (including legal fees), fines,
above paragraph, neither the general partner, nor any settlements and other amounts incurred in connection
affiliate of the general partner
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
or the partnership, will be indemnified from any with any actions relating to the operations of the
liability incurred by them in connection with (1) any AIMCO Operating Partnership, as set forth in the AIMCO
claim or settlement involving allegations that the Operating Partnership Agreement. The Delaware Limited
securities laws were violated by the general partner or Partnership Act provides that subject to the standards
by any such other person unless: (a) the general and restrictions, if any, set forth in its partnership
partner or other persons or entities seeking agreement, a limited partnership may, and shall have
indemnification are successful in defending such the power to, indemnify and hold harmless any partner
action, and (b) such indemnification is specifically or other person from and against any and all claims and
approved by a court of law which is advised as to the demands whatsoever. It is the position of the
current position of any relevant regulatory agencies Securities and Exchange Commission that indemnification
regarding indemnification for securities law of directors and officers for liabilities arising under
violations; or (2) any liability imposed by law, the Securities Act is against public policy and is
including liability for fraud, bad faith or negligence. unenforceable pursuant to Section 14 of the Securities
The general partner has no liability whatsoever to the Act of 1933.
partnership or any limited partner for any loss
suffered by the partnership which arises out of any
action or inaction of the general partner, if the
general partner, in good faith, determined that such
action or inaction was in the best interests of the
partnership and did not constitute negligence or
misconduct of the general partner.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner and elect a successor general partner upon a affairs of the AIMCO Operating Partnership. The general
vote of the limited partners owning a majority of the partner may not be removed as general partner of the
outstanding units. The general partner may admit an AIMCO Operating Partnership by the OP Unitholders with
additional or substitute general partner with the or without cause. Under the AIMCO Operating Partnership
consent of limited partners owning a majority of the Agreement, the general partner may, in its sole
outstanding units. No limited partner may substitute a discretion, prevent a transferee of an OP Unit from
transferee of his units in such limited partner's place becoming a substituted limited partner pursuant to the
without the consent of the general partner which may be AIMCO Operating Partnership Agreement. The general
withheld at the sole discretion of the general partner. partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners (1) to reflect the addition or the general partner may, without the consent of the OP
substitution of limited partners or the reduction of Unitholders, amend the AIMCO Operating Partnership
the capital accounts upon the return of capital to Agreement, amendments to the AIMCO Operating
partners; (2) to add the representations, duties or Partnership Agreement require the consent of the
obligations of the general partner or affiliates or holders of a majority of the outstanding Common OP
surrender any right or power granted to the general Units, excluding AIMCO and certain other limited
partner or its affiliates herein, for the benefit of exclusions (a "Majority in Interest"). Amendments to
the limited partners; (3) to cure any ambiguity, to the AIMCO Operating Partnership Agreement may be
correct or supplement any provision herein which may be proposed by the general partner or by holders of a
inconsistent with any other provision herein, or to add Majority in Interest. Following such proposal, the
any other provisions with respect to matters or general partner will submit any proposed amendment to
questions arising under your partnership's agreement of the OP Unitholders. The general partner will seek the
limited liability; (4) to delete or add any provision written consent of the OP Unitholders on the proposed
from or to your partnership's agreement of limited amendment or will call a meeting to vote thereon. See
liability requested to be so deleted or added by any "Description of OP Units -- Amendment of the AIMCO
federal or state regulatory agency, which is deemed by Operating Partnership Agreement" in the accompanying
such agency to be for the benefit of the limited Prospectus.
partners. No amendment may be made without the consent
of the affected limited partner if such amendment: (1)
converts the limited partner into a general partner,
(2) eliminates or decreases the limited liability of
the limited partner, (3) alters the interest of a
partner in the allocations or distributions from your
partnership or (4) affects the status of your
partnership as a partnership for Federal income tax
purposes. Other amendments to your partnership's
agreement of limited partnership must be approved by
limited partnership holding a majority of the then
outstanding units.
</TABLE>
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<PAGE> 1452
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Compensation and Fees
<TABLE>
<S> <C>
Your general partner receives 9% of the Cash Available The general partner does not receive compensation for
For Distribution as compensation for its services as its services as general partner of the AIMCO Operating
general partner and may receive reimbursement for Partnership. However, the general partner is entitled
expenses incurred in such capacity. to payments, allocations and distributions in its
capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for any negligence, no OP Unitholder has personal liability for
debts, liabilities, contracts or obligations of your the AIMCO Operating Partnership's debts and
partnership. A limited partner is liable only to make obligations, and liability of the OP Unitholders for
payments of his capital contribution when due under the AIMCO Operating Partnership's debts and obligations
your partnership's agreement of limited partnership. is generally limited to the amount of their invest-
After its capital contribution is fully paid, no ment in the AIMCO Operating Partnership. However, the
limited partner will, except as otherwise required by limitations on the liability of limited partners for
applicable law, be required to make any further capital the obligations of a limited partnership have not been
contributions or lend any funds to your partnership. clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, partnership funds may not be commingled partnership agreement, Delaware law generally requires
with the funds of any other person except as provided a general partner of a Delaware limited partnership to
in the partnership agreement. Your general partner may adhere to fiduciary duty standards under which it owes
engage in or possess an interest in any other business its limited partners the highest duties of good faith,
or venture of every nature and description, fairness and loyalty and which generally prohibit such
independently or with others, including the ownership, general partner from taking any action or engaging in
financing, leasing, operation, management, brokerage any transaction as to which it has a conflict of
and development of real property. interest. The AIMCO Operating Partnership Agreement
expressly authorizes the general partner to enter into,
on behalf of the AIMCO Operating Partnership, a right
of first opportunity arrangement and other conflict
avoidance agreements with various affiliates of the
AIMCO Operating Partnership and the general partner, on
such terms as the general partner, in its sole and
absolute discretion, believes are advisable. The AIMCO
Operating Partnership Agreement expressly limits the
liability of the general partner by providing that the
general partner, and its officers and directors will
not be liable or accountable in damages to the AIMCO
Operating Partnership, the limited partners or
assignees for errors in judgment or mistakes of fact or
law or of any act or omission if the general partner or
such director or officer acted in good faith. See
"Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
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<PAGE> 1453
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
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<PAGE> 1454
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; extend the term of Prospectus. So long as any institution of bankruptcy
your partnership; remove or elect a Preferred OP Units are outstand- proceedings, an assignment for the
general partner; and approve or ing, in addition to any other vote benefit of creditors and certain
disapprove the sale of all or or consent of partners required by transfers by the general partner of
substantially all of the assets of law or by the AIMCO Operating its interest in the AIMCO Operating
your partnership. Partnership Agreement, the Partnership or the admission of a
affirmative vote or consent of successor general partner.
A general partner may cause the holders of at least 50% of the
dissolution of your partnership by outstanding Preferred OP Units will Under the AIMCO Operating Partner-
retiring. Your partnership may be be necessary for effecting any ship Agreement, the general partner
continued by the remaining general amendment of any of the provisions has the power to effect the
partner or, if none, the limited of the Partnership Unit Desig- acquisition, sale, transfer,
partners may agree to continue your nation of the Preferred OP Units exchange or other disposition of
partnership by electing a successor that materially and adversely any assets of the AIMCO Operating
general partner upon the vote of affects the rights or preferences Partnership (including, but not
the limited partners owning a of the holders of the Preferred OP limited to, the exercise or grant
majority of the units within 120 Units. The creation or issuance of of any conversion, option,
days after the retirement of the any class or series of partnership privilege or subscription right or
general partner. units, including, without any other right available in
limitation, any partnership units connection with any assets at any
that may have rights senior or time held by the AIMCO Operating
superior to the Preferred OP Units, Partnership) or the merger,
shall not be deemed to materially consolidation, reorganization or
adversely affect the rights or other combination of the AIMCO
preferences of the holders of Operating Partnership with or into
Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations, sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
The distributions payable to the $ per Preferred OP Unit; tribute quarterly all, or such
partners are not fixed in amount provided, however, that at any time portion as the general partner may
and depend upon the operating and in its sole and abso-
</TABLE>
S-65
<PAGE> 1455
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
results and net sales or from time to time on or after the lute discretion determine, of
refinancing proceeds available from fifth anniversary of the issue date Available Cash (as defined in the
the disposition of your of the Preferred OP Units, the AIMCO Operating Partnership
partnership's assets. AIMCO Operating Partnership may Agreement) generated by the AIMCO
adjust the annual distribution rate Operating Partnership during such
on the Preferred OP Units to the quarter to the general partner, the
lower of (i) % plus the annual special limited partner and the
interest rate then applicable to holders of Common OP Units on the
U.S. Treasury notes with a maturity record date established by the
of five years, and (ii) the annual general partner with respect to
dividend rate on the most recently such quarter, in accordance with
issued AIMCO non-convertible their respective interests in the
preferred stock which ranks on a AIMCO Operating Partnership on such
parity with its Class H Cumu- record date. Holders of any other
lative Preferred Stock. Such Preferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may assign one or There is no public market for the There is no public market for the
more whole units by a written Preferred OP Units and the OP Units. The AIMCO Operating Part-
instrument in accordance with your Preferred OP Units are not listed nership Agreement restricts the
partnership's agreement of limited on any securities exchange. The transferability of the OP Units.
partnership. In order for an Preferred OP Units are subject to Until the expiration of one year
assignee to become a substituted restrictions on transfer as set from the date on which an OP
limited partner the following forth in the AIMCO Operating Unitholder acquired OP Units,
conditions must first be satisfied: Partnership Agreement. subject to certain exceptions, such
(1) the filing with the partnership OP Unitholder may not transfer all
of a written instrument of as- Pursuant to the AIMCO Operating or any portion of its OP Units to
signment covering no less than five Partnership Agreement, until the any transferee without the consent
units; (2) the execution by the expiration of of the gen-
assignor and
</TABLE>
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<PAGE> 1456
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
assignee of any other documentation one year from the date on which a eral partner, which consent may be
required or requested by the holder of Preferred OP Units withheld in its sole and absolute
general partner; (3) the written acquired Preferred OP Units, discretion. After the expiration of
consent of the general partner is subject to certain exceptions, such one year, such OP Unitholder has
obtained; and (4) a transfer fee holder of Preferred OP Units may the right to transfer all or any
covering all reasonable expenses not transfer all or any portion of portion of its OP Units to any
connected with such substitution is its Preferred OP Units to any person, subject to the satisfaction
paid to the partnership. transferee without the consent of of certain conditions specified in
the general partner, which consent the AIMCO Operating Partnership
may be withheld in its sole and Agreement, including the general
absolute discretion. After the partner's right of first refusal.
expiration of one year, such See "Description of OP Units --
holders of Preferred OP Units has Transfers and Withdrawals" in the
the right to transfer all or any accompanying Prospectus.
portion of its Preferred OP Units
to any person, subject to the After the first anniversary of
satisfaction of certain conditions becoming a holder of Common OP
specified in the AIMCO Operating Units, an OP Unitholder has the
Partnership Agreement, including right, subject to the terms and
the general partner's right of conditions of the AIMCO Operating
first refusal. Partnership Agreement, to require
the AIMCO Operating Partnership to
After a one-year holding period, a redeem all or a portion of the
holder may redeem Preferred OP Common OP Units held by such party
Units and receive in exchange in exchange for a cash amount based
therefor, at the AIMCO Operating on the value of shares of Class A
Partnership's option, (i) subject Common Stock. See "Description of
to the terms of any Senior Units, OP Units -- Redemption Rights" in
cash in an amount equal to the the accompanying Prospectus. Upon
Liquidation Preference of the receipt of a notice of redemption,
Preferred OP Units tendered for the AIMCO Operating Partnership
redemption, (ii) a number of shares may, in its sole and absolute
of Class I Cumulative Preferred discretion but subject to the
Stock of AIMCO that pay an restrictions on the ownership of
aggregate amount of dividends yield Class A Common Stock imposed under
equivalent to the distributions on AIMCO's charter and the transfer
the Preferred OP Units tendered for restrictions and other limitations
redemption and are part of a class thereof, elect to cause AIMCO to
or series of preferred stock that acquire some or all of the tendered
is then listed on the New York Common OP Units in exchange for
Stock Exchange or another national Class A Common Stock, based on an
securities exchange, or (iii) a exchange ratio of one share of
number of shares of Class A Common Class A Common Stock for each Com-
Stock of AIMCO that is equal in mon OP Unit, subject to adjustment
Value to the Liquidation Preference as provided in the AIMCO Operating
of the Preferred OP Units tendered Partnership Agreement.
for redemption. The Preferred OP
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 1457
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
S-68
<PAGE> 1458
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee equal to 9% of your
partnership's cash available for distributions for its services as general
partner and may also receive reimbursements for expenses generated in such
capacity. The general partner received such fees and reimbursements equalling
$154,000, $134,000 and $64,000, in 1996, 1997 and the first six months of 1998,
respectively. The property manager received management fees of $235,000 in 1996,
$242,000 in 1997 and $120,000 for the first six months of 1998. The AIMCO
Operating Partnership has no current intention of changing the fee structure for
the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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YOUR PARTNERSHIP
GENERAL
Century Properties Fund XVIII was organized on July 16, 1982, under the
laws of the State of California. Its primary business is real estate ownership
and related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following two residential
apartment complexes: Overlook Apartments, a 304-unit complex in Salt Lake City,
Utah; and Oak Run Apartments, a 420-unit complex in Dallas, Texas. The general
partner of your partnership is Fox Partners, which is a majority-owned
subsidiary of AIMCO. The executive officers and directors of the general partner
are the same as those of the AIMCO GP, which are set forth in Appendix B hereto.
NPI-AP Management, L.P., which is a majority-owned subsidiary of AIMCO, serves
as manager of the properties owned by your partnership. As of December 31, 1997,
there were 75,000 units issued and outstanding, which were held of record by
4,817 limited partners. Your partnership's principal executive offices are
located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and
its telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated November 5, 1982, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) anticipated your partnership
would sell its properties five to eight years after their acquisition, depending
on the current real estate and money markets, economic climate and income tax
consequences to the limited partners. Under your partnership's agreement of
limited partnership, the term of the partnership will continue until December
31, 2007, unless sooner terminated as provided in the agreement or by law.
Limited partners could, as an alternative to tendering their units, take a
variety of possible actions, including voting to liquidate the partnership or
amending the agreement of limited partnership to authorize limited partners to
cause the partnership to merge with another entity or engage in a "roll-up" or
similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating
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<PAGE> 1467
current trends, competition, new construction and economic changes. The
general partner oversees each asset's operating performance and continuously
evaluates the physical improvement requirements. In addition, the financing
structure for each property, tax implications and the investment climate are all
considered. Any of these factors, and possibly others, could potentially
contribute to any decision by the general partner to sell, refinance, upgrade
with capital improvements or hold a particular partnership property. Based on
the above considerations, the general partner has determined that it is not in
the best interests of limited partners to sell or refinance any property at the
present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner is not liable to the
partnership for any loss suffered by the partnership which arises out of any
action or inaction of the general partner, if the general partner, in good
faith, determined that such action or inaction was in the best interests of the
partnership and did not constitute negligence or misconduct of the general
partner. As a result, unitholders might have a more limited right of action in
certain circumstances than they would have in the absence of such a provision in
your partnership's agreement of limited partnership. The general partner of your
partnership is majority-owned by AIMCO. See "Conflicts of Interest".
Your general partner and any of its affiliates are entitled to
indemnification for any liability, loss or damage incurred by them or by the
partnership by reason of any act performed or omitted to be performed by them in
connection with the business of the partnership, including costs and attorney's
fees and any amounts expended in the settlements of any claims of liability
provided that if such liability arises out of any action or inaction of the
general partner such conduct did not constitute fraud, negligence or misconduct
by the general partner. All judgments against the partnership and the general
partner, wherein the general partner is entitled to indemnification, must first
be satisfied from partnership assets before the general partner is responsible
for these obligations. Notwithstanding the above paragraph, neither the general
partner, nor any affiliate of the general partner or the partnership, will be
indemnified from any liability incurred by them in connection with (1) any claim
or settlement involving allegations that the securities laws were violated by
the general partner or by any such other person unless: (a) the general partner
or other person or entities seeking indemnification are successful in defending
such action, and (b) such indemnification is specifically approved by a court of
law which is advised as to the current position of any relevant regulatory
agencies regarding indemnification for securities law violations; or (2) any
liability imposed by law, including liability for fraud, bad faith or
negligence.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
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<PAGE> 1468
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $1,000.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $0.00
January 1, 1996 - December 31, 1996......................... 0.00
January 1, 1997 - December 31, 1997......................... 8.58
January 1, 1998 - June 30, 1998............................. 9.80
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 35.6% interest in your partnership, including 26,940 units held by us and the
interest held by Fox Partners, as general partner of your partnership. Except as
set forth above, neither the AIMCO Operating Partnership, nor, to the best of
its knowledge, any of its affiliates, (i) beneficially own or have a right to
acquire any units, (ii) have effected any transactions in the units in the past
60 days, or (iii) have any contract, arrangement, understanding or relationship
with any other person with respect to any securities of your partnership,
including, but not limited to, contracts, arrangements, understandings or
relationships concerning transfer or voting thereof, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against loss
or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $182,000
1995........................................................ 162,000
1996........................................................ 154,000
1997........................................................ 134,000
1998 (through June 30)...................................... 64,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $177,000
1995........................................................ 212,000
1996........................................................ 235,000
1997........................................................ 242,000
1998 (through June 30)...................................... 120,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-79
<PAGE> 1469
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of
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<PAGE> 1470
AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has previously
performed certain legal services on behalf of AIMCO and the AIMCO Operating
Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Century Properties Fund XVIII
appearing in Century Properties Fund XVIII Annual Report (Form 10-KSB) for the
year ended December 31, 1997, have been audited by Imowitz Koenig & Co., LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
S-81
<PAGE> 1471
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: Century Properties Fund XVIII
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
Century Properties Fund XVIII (the "Partnership") (the Purchaser, AIMCO, the
General Partner and other affiliates and subsidiaries of AIMCO are referred to
herein collectively as the "Company"), is contemplating a transaction (the
"Offer") in which a minority of the outstanding limited partnership interests in
the Partnership (the "Units") will be acquired by the Purchaser in exchange for
an offer price per Unit of $ in cash, or Common OP Units of the
Purchaser, or Preferred OP Units of the Purchaser, or a combination of
any of such forms of consideration. The limited partners of the Partnership (the
"Limited Partners") will have the choice to maintain their current interest in
the Partnership or exchange their Units for any or a combination of such forms
of consideration. The amount of cash, Common OP Units or Preferred OP Units
offered per Unit is referred to herein as the "Offer Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
A-1
<PAGE> 1472
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of the Partnership's Properties or the sale or
transfer of a material amount of the Partnership's other assets; any changes to
the Partnership's senior management or personnel or their compensation; any
changes in the
A-2
<PAGE> 1473
Partnership's present capitalization or distribution policy; or any other
material changes in the Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 1474
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership and the directors of AIMCO, are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1475
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1476
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1477
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1478
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1479
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1480
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CENTURY PROPERTIES FUND XIX
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of December 31, 1996, an affiliate of
your general partner estimated the net asset value of your units to be
$288.00 per unit as of June 30, 1997 and an affiliate of your general
partner estimated the net liquidation value of your units to be $262.35
per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1481
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-15
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Century
Properties Fund XIX........................ S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-31
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
Certain Tax Consequences to Non-Tendering and
Partially-Tendering Offerees............... S-48
VALUATION OF UNITS............................. S-49
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-52
Comparison of Consideration to Alternative
Consideration.............................. S-52
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-56
Summary of Materials Considered.............. S-56
Summary of Reviews........................... S-57
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-59
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-60
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-65
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
</TABLE>
i
<PAGE> 1482
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-79
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Compensation Paid to the General Partner and
its Affiliates............................. S-80
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-82
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1483
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Century Properties Fund XIX. For each unit that you tender, you may choose
to receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Fox Partners II, the
managing general partner of your partnership (the "general partner"), and
the company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1484
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1485
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $20.02 per unit for the six months
ended June 30, 1998 (equivalent to $ on an annual basis). We will pay
fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1486
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, the market for
your units may be limited.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership. In addition, if there is a sale or exchange of 50% or more of
the total interest in capital and profits of your partnership within any
12-month period, including sales or exchanges resulting from the offer,
your partnership will terminate for federal income tax purposes. Any such
termination may, among other things, subject the assets of your partnership
to longer depreciable lives than those currently applicable to the assets
of your partnership. This would generally decrease the annual average
depreciation deductions allocable to you if you do not tender all of your
units (thereby increasing the taxable income allocable to your units each
year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership. Any such
termination may also change (and possibly shorten) your holding period with
respect to your units that you choose to retain.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF THE OFFER. THIS SUMMARY DOES NOT DISCUSS ALL
ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF
YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE
OFFER TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX
SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR
TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE
OFFER.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $21 per unit to $380 per unit over
the last two years. As of December 31, 1996, an affiliate of your general
partner estimated the net asset value of your units to be $288.00 per unit
and as of June 30, 1997, an affiliate of your general partner estimated the
net liquidation value of your units to be $262.35 per unit. However, we do
not believe that these valuations represent the current fair market value
of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to
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your partnership's annual net operating income. We determined an
appropriate capitalization rate using our best judgment, but our valuation
is just an estimate. Although the direct capitalization method is a
widely-accepted way of valuing real estate, there are a number of other
methods available to value real estate, each of which may result in
different valuations of the property. The proceeds that you would receive
if you sold your units to someone else or if your partnership were actually
liquidated might be higher or lower than our offer consideration. An actual
liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of 5
units (except for units held by IRAs and Keogh Plans) if you are tendering
some of your units. You may tender fractional units only if you are
tendering all of your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However,
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we reserve the right to extend, terminate or amend the offer and, under
certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
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SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of December
31, 1996, an affiliate of your general partner estimated the net asset value of
your units to be $288.00 per unit and as of June 30, 1997, an affiliate of your
general partner estimated the net liquidation value of your units to be $262.35
per unit. However, we do not believe that these valuations represent the current
fair market value of your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $21.00 per unit to $380.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
In addition, if there is a sale or exchange of 50% or more of the total
interest in capital and profits of your partnership within any 12-month period,
including sales or exchanges resulting from the offer, your partnership will
terminate for federal income tax purposes. Any such termination may, among other
things, subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
if you do not tender all of your units (thereby increasing the taxable income
allocable to your units each year), but would have no effect on the total
depreciation deductions available over the useful lives of the assets of your
partnership. Any such termination may also change (and possibly shorten) your
holding period with respect to your units that you choose to retain.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of
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factors related to your individual tax situation, including your tax basis in
your units, whether you dispose of all of your units in your partnership, and
whether the "passive loss" rules apply to your investments. Because the income
tax consequences of an exchange of units will not be the same for everyone, you
should consult your tax advisor before determining whether to tender your units
pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general
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partner may not be removed by holders of OP Units. As a result, holders of OP
Units have limited influence on matters affecting the operation of the AIMCO
Operating Partnership and third parties may find it difficult to attempt to gain
control or influence the activities of our operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although
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these agreements provide us with some protection against rising interest rates,
these agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
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POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
32.9% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of
S-12
<PAGE> 1495
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-13
<PAGE> 1496
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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<PAGE> 1497
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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<PAGE> 1498
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
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<PAGE> 1499
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $21 to $380
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 1500
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to 10% of your partnership's cash available for
distribution for its services as general partner and may receive reimbursement
for expenses generated in such capacity. In the first six months of 1998, your
general partner received $82,000. The property manager received management fees
of $405,000 for the first six months of 1998. We have no current intention of
changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Century Properties Fund XIX was organized on August 6, 1982, under the laws
of the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation
S-18
<PAGE> 1501
and cash distributions to its limited partners. Your partnership's investment
portfolio currently consists of the following eight residential apartment
complexes: Wood Lake Apartments, a 220-unit complex in Atlanta, Georgia;
Greenspoint Apartments, a 336-unit complex in Phoenix, Arizona; Sandspoint
Apartments, a 432-unit complex in Phoenix, Arizona; Vinings Peak Apartments, a
280-unit complex in Atlanta, Georgia; Plantation Crossing Apartment, a 180-unit
complex in Atlanta, Georgia; Sunrunner Apartments, a 200-unit complex in St.
Petersburg, Florida; McMillan Place Apartments, a 402-unit complex in Dallas,
Texas; and Misty Woods Apartments, a 228-unit complex in Charlotte, North
Carolina. The general partner of your partnership is Fox Partners II, which is a
majority-owned subsidiary of AIMCO. NPIAP Management L.P., which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
your partnership. As of December 31, 1997, there were 89,292 units of limited
partnership interest issued and outstanding, which were held of record by 5,900
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
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<PAGE> 1502
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1503
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
- ---------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1504
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1505
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1506
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1507
SUMMARY FINANCIAL INFORMATION OF CENTURY PROPERTIES FUND XIX
The summary financial information of Century Properties Fund XIX for the
six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Century Properties Fund XIX for the years ended December 31,
1997, 1996, and 1995 is based on audited financial statements. This information
should be read in conjunction with such financial statements, including the
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" incorporated by reference herein.
CENTURY PROPERTIES FUND XIX
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------- -------------------------------
1998 1997 1997 1996 1995
------ ------ ------- ------- -------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues........................................... $8,079 $7,769 $15,989 $15,747 $15,079
Net Income (Loss)........................................ 310 96 85 (948)(A) (2,047)(A)
Net Income (Loss) per limited partnership unit........... 3.06 0.95 0.84 (9.50) (36.39)
Distributions per limited partnership unit............... 20.01 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------- -------------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation........... $54,937 $56,864 $55,825 $57,863 $59,534
Total Assets........................................... 60,869 63,136 62,738 63,240 64,379
Notes Payable.......................................... 61,004 61,292 60,900 61,668 62,342
Partners' Capital (Deficit)............................ (1,728) (203) (214) (299) 663
</TABLE>
- ---------------
(A) Net income before extraordinary items.
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CENTURY PROPERTIES
PARTNERSHIP FUND XIX
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding..................... $1.125 $1.85 $20.01 $0.00
</TABLE>
S-25
<PAGE> 1508
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $21 per unit to
$380.00 per unit from January 1, 1997 to September 30, 1998. As of December 31,
1996, an affiliate of your general partner estimated the net asset value of your
units to be $288.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1997, an affiliate of your general partner
estimated the net liquidation value of your units to be $262.35 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 1509
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
In addition, if there is a sale or exchange of 50% or more of the total
interest in capital and profits of your partnership within any 12-month period,
including sales or exchanges resulting from the offer, your partnership will
terminate for federal income tax purposes. Any such termination may, among other
things, subject the assets of your partnership to longer depreciable lives than
those currently applicable to the assets of your partnership. This would
generally decrease the annual average depreciation deductions allocable to you
if you do not tender all of your units (thereby increasing the taxable income
allocable to your units each year), but would have no effect on the total
depreciation deductions available over the useful lives of the assets of your
partnership. Any such termination may also change (and possibly shorten) your
holding period with respect to your units that you choose to retain.
S-27
<PAGE> 1510
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ , current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the six months ended June 30, 1998
were $20.02 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
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FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
POSSIBLE TERMINATION OF YOUR PARTNERSHIP FOR FEDERAL INCOME TAX
PURPOSES. If there is a sale or exchange of 50% or more of the total interest
in capital and profits of your partnership within any 12-month period, including
sales or exchanges resulting from the offer, your partnership will terminate for
federal income tax purposes. Any such termination may, among other things,
subject the assets of your partnership to longer depreciable lives than those
currently applicable to the assets of your partnership. This would generally
decrease the annual average depreciation deductions allocable to you if you do
not tender all of your units (thereby increasing the taxable income allocable to
your units each year), but would have no effect on the total depreciation
deductions available over the useful lives of the assets of your partnership.
Any such termination may also change (and possibly shorten) your holding period
with respect to your units that you choose to retain.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
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partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in NPI-AP Management, L.P.,
which manages the properties owned by your partnership. Through subsidiaries,
AIMCO currently owns, in the aggregate, approximately a 35.6% interest in your
partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
On October 15, 1998, Madison Liquidity Investors 104, LLC ("Madison"),
which is not affiliated with us or your general partner, commenced a tender
offer to acquire units of your partnership. Madison is seeking to purchase up to
4.9% of the outstanding units for $100 per unit, less transfer fees. The offer
expires November 20, 1998.
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In August 1997, IPLP Acquisition I LLP, then
an affiliate of Insignia and now our affiliate, commenced a tender offer
pursuant to which it acquired 4,892 units (representing approximately 5.5% of
the number outstanding) at a cash purchase price of $175 per unit on October 6,
1998.
Prior to such tender offer, DeForest Ventures I, L.P., which was
unaffiliated with Insignia and is not affiliated with AIMCO, commenced tender
offers for $65.70 per unit and purchased 24,812 shares between October 1994 and
June 1995.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
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ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
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There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of five units (except for units held by IRAs and Keogh Plans)
if you are tendering some of your units. You may tender fractional units only if
you are tendering all of your units. No alternative, conditional or contingent
tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings, approvals or other actions by or with any
domestic or foreign governmental authority or administrative or regulatory
agency that would be required prior to the acquisition of units by the AIMCO
Operating Partnership pursuant to the offer as contemplated herein, other than
the filing with the SEC of a Tender Offer Statement on Schedule 14D-1 and any
amendments required thereto. While there is no present intent to delay the
purchase of units tendered pursuant to the offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
your partnership's business, or that certain parts of your partnership's
business might not have to be disposed of or other substantial conditions
complied with in order to obtain such approval or action, any of which could
cause the AIMCO Operating Partnership to elect to terminate the offer without
purchasing units hereunder. The AIMCO Operating Partnership's obligation to
purchase and pay for units is subject to certain conditions, including
conditions related to the legal matters discussed in this section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
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Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have filed an amended complaint. On October
14, 1998, the AIMCO and Insignia defendants filed demurrers to the amended
complaint. The demurrers are scheduled to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate
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compensatory damages to exceed $15 million. An answer to the complaint was
filed by the defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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<PAGE> 1527
CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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<PAGE> 1528
pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
S-46
<PAGE> 1529
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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<PAGE> 1530
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
CERTAIN TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING OFFEREES
Section 708 of the Code provides that if there is a sale or exchange of 50%
or more of the total interest in capital and profits of a partnership within any
12-month period, such partnership terminates for federal income tax purposes (a
"Termination"). It is possible that the AIMCO Operating Partnership's
acquisition of units pursuant to the offer could result in a Termination of your
partnership. If a purchase of units results in a Termination, the following
federal income tax events will be deemed to occur with respect to such
Termination: the terminated Partnership (the "Old Partnership") will be deemed
to have contributed all of its assets (subject to its liabilities) (the
"Hypothetical Contribution") to a new partnership (the "New Partnership") in
exchange for an interest in the New Partnership and, immediately thereafter, the
Old Partnership will be deemed to have distributed interests in the New
Partnership (the "Hypothetical Distribution") to the AIMCO Operating Partnership
and offerees who do not tender all of their units (a "Remaining Offeree") in
proportion to their respective interests in the Old Partnership in liquidation
of the Old Partnership.
A Remaining Offeree will not recognize any gain or loss upon the
Hypothetical Distribution or upon the Hypothetical Contribution and the capital
accounts of the Remaining Offerees in the Old Partnership will carry over intact
into the New Partnership. Any Termination may change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes.
The New Partnership's adjusted tax basis in its assets will carry over from
the Old Partnership's basis in such assets immediately before the Termination.
Any Termination may also subject the assets of the New Partnership to
depreciable lives in excess of those currently applicable to the Old
Partnership. This would generally decrease the annual average depreciation
deductions allocable to the Remaining Offerees following consummation of the
Offer (thereby increasing the taxable income allocable to their retained units
each year), but would have no effect on the total depreciation deductions
available over the useful lives of the assets of your partnership.
Section 704(c) of the Code will apply to future allocation of income, gain,
loss and deductions with respect to any New Partnership assets among the AIMCO
Operating Partnership and the Remaining Offerees following the consummation of
the offer only to the extent that such assets were Section 704(c) property in
the hands of the Old Partnership immediately prior to the Hypothetical
Contribution. Moreover, subject to the Code's anti-abuse regulations, the New
Partnership will not be required to apply the same Section 704(c) allocation
method applied by the Old Partnership. The Hypothetical Contribution will not
trigger a new five-year holding period for purposes of measuring
post-contribution appreciation of assets for the offeree who contributed such
assets.
Elections as to certain tax matters previously made by the Old Partnership
prior to Termination will not be applicable to the New Partnership unless the
New Partnership chooses to make the same elections.
Additionally, upon a Termination, the Old Partnership's taxable year will
close for all offerees. In the case of a Remaining Offeree reporting on a tax
year other than a calendar year, the closing of your partnership's taxable year
may result in more than 12 months' taxable income or loss of the Old Partnership
being includible in such Offeree's taxable income for the year of Termination.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
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<PAGE> 1531
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Wood Lake Apartments..................... $ % $
Greenspoint Apartments...................
Sands Point Apartments...................
Vinings Peak Apartments..................
Plantation Crossing Apartments...........
Sunrunner Apartments.....................
McMillan Place Apartments................
Misty Woods Apartments...................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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<PAGE> 1532
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
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<PAGE> 1533
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ , current annualized distributions with respect to the
Common OP Units are $2.25, and distributions with respect to your units for
the six months ended June 30, 1998 were $20.02 (equivalent to $ on an
annualized basis). This is equivalent to distributions of $ per year
on the number of tax-deferral % Preferred OP Units, or distributions
of $ per year on the number of tax deferral Common OP Units, that you
would receive in exchange for each of your partnership's units. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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<PAGE> 1534
partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-52
<PAGE> 1535
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $21.00 to $380.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from July 1, 1995 to June
30, 1997 an aggregate of 1,139 units (representing less than 1.3% of the total
outstanding units) was transferred (excluding units transferred by DeForest
Ventures I, L.P. to Insignia in January 1996 and in tender offers) in sale
transactions. Set forth in the table below are the high and low sales prices of
units for the quarterly periods from March 1, 1996 to September 30, 1998, as
reported by the general partner and by The Partnership Spectrum, which is an
independent, third-party source. The gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices;
thus the AIMCO Operating Partnership does not know whether the information
compiled by The Partnership Spectrum is accurate or complete. The transfer
paperwork submitted to the general partner often does not include the requested
price information or contains conflicting information as to the actual sales
price. Accordingly, you should not rely upon this information as being
completely accurate.
CENTURY PROPERTIES FUND XIX
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(a) THE PARTNERSHIP SPECTRUM(b)
----------------------------- -----------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter...................... $ 21.00 $380.00 Not Available Not Available
Second Quarter..................... 100.00 225.01 Not Available Not Available
First Quarter...................... 60.00 188.00 Not Available Not Available
Fiscal Year Ended December 31, 1997:
Fourth Quarter..................... 125.00 130.00 Not Available Not Available
Third Quarter...................... 74.20 164.00 Not Available Not Available
Second Quarter..................... 67.00 168.00 $110.00 $160.00
First Quarter...................... 56.57 132.00 92.00 164.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter..................... Not Available Not Available 110.00 118.00
Third Quarter...................... Not Available Not Available 76.00 102.00
Second Quarter..................... Not Available Not Available 57.00 73.00
First Quarter...................... Not Available Not Available -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general
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<PAGE> 1536
partner by sellers and buyers of units transferred in sale transactions
(i.e., excluding transactions believed to result from the death of a
limited partner, rollover to an IRA account, establishment of a trust,
trustee to trustee transfers, termination of a benefit plan, distributions
from a qualified or non-qualified plan, uniform gifts, abandonment of units
or similar non-sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Certain of your partnership's properties have been appraised in
the past several years by independent, third party appraisers, Koeppel Tener
Real Estate Services ("KTR") or Joseph J. Blake & Associates, Inc. ("Blake")
(the "Appraisers"), in connection with a refinancing of the properties.
According to the appraisal reports, the scope of the appraisals included an
inspection of the properties and an analysis of the surrounding markets. The
Appraisers relied principally on the income capitalization approach to valuation
and secondarily on the sales comparison approach, and represented that their
reports were prepared in accordance with the Code of Professional Ethics and
Standards of Professional Appraisal Practice of the Appraisal Institute and the
Uniform Standards of Professional Appraisal Practice, and in compliance with the
Appraisal Standards set forth in the Financial Institutions Reform, Recovery and
Enforcement Act of
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<PAGE> 1537
1989 (known as "FIRREA"). The estimated market values of the fee simple
estate of the properties were as follows:
<TABLE>
<CAPTION>
PROPERTY NAME APPRAISED VALUE DATE OF APPRAISAL APPRAISER
------------- --------------- ----------------- ---------
<S> <C> <C> <C>
Sunrunner Apartments............ $ 5,400,000 April 15, 1996 Blake
McMillan Place Apartments....... 11,500,000 July 1, 1997 KTR
Misty Woods Apartments.......... 8,500,000 November 2, 1995 KTR
</TABLE>
A copy of the summary of the appraisal has been filed as an exhibit to the
AIMCO Operating Partnership's Tender Offer Statement on Schedule 14D-1 filed
with the SEC.
Estimate of Net Asset Value in Connection with Insignia Property Trust
Formation. In connection with the formation of Insignia Property Trust, Insignia
Financial Group, Inc. ("Insignia") prepared estimates of the value of your
partnership's properties and of a unit as of December 31, 1996. Insignia
estimated the aggregate value of your partnership properties to be $85,484,882
and the asset value of a unit to be $288. However, since December 1996, the
operating performance of your partnership's properties have changed, the current
assets of your partnership has changed and your partnership's properties have
increased in value. Therefore, the AIMCO Operating Partnership believes that
this estimate of net asset value per unit does not necessarily represent either
the fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Estimate of Net Liquidation Value in Connection with the Tender Offer by an
Affiliate. In connection with the August 1997 tender offer by an affiliate of
your general partner, the affiliate estimated the net liquidation value of a
unit (as of June 30, 1997) to be $262.35. This net asset value estimate was
based on a hypothetical sale of all of your partnership's properties and the
distribution to the limited partners and the general partner of the gross
proceeds of such sales, net of related indebtedness, together with the
partnership's cash, proceeds from temporary investments, and all other assets
that are believed to have liquidation value, after provision in full for all of
the partnership's other known liabilities. This net liquidation value estimate
did not take into account (i) timing considerations or (ii) costs associated
with winding up your partnership. Therefore, the AIMCO Operating Partnership
believes that this estimate of the net liquidation value of a unit does not
necessarily represent either the fair market value of a unit or the amount a
limited partner reasonably could expect to receive if the partnership's
properties were sold and the partnership was liquidated. For this reason, the
AIMCO Operating Partnership considered this net asset value estimate to be less
meaningful in determining the offer consideration than the analysis described
above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders.
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<PAGE> 1538
We determined the offer consideration, and Stanger did not, and was not
requested to, make any recommendations as to the form or amount of consideration
to be paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also
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<PAGE> 1539
performed site inspections of your partnership's properties, reviewed local real
estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated
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<PAGE> 1540
to Stanger by your partnership, AIMCO, or the management of the partnership's
property. Stanger has not performed an independent appraisal, engineering study
or environmental study of the assets and liabilities of your partnership.
Stanger relied upon the representations of your partnership and AIMCO
concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
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<PAGE> 1541
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-59
<PAGE> 1542
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Cash Available for Distribution (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2007. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership was formed to invest in, acquire, The purpose of the AIMCO Operating Partnership is to
manage and ultimately sell income producing real conduct any business that may be lawfully conducted by
properties which are improved or capable of improvement a limited partnership organized pursuant to the
or which will be improved within a reasonable period Delaware Revised Uniform Limited Partnership Act (as
after acquisition and to make, service and ultimately amended from time to time, or any successor to such
dispose of mortgage loans on income producing real statute) (the "Delaware Limited Partnership Act"),
properties. Your partnership may enter into ventures, provided that such business is to be conducted in a
partnerships, REITs and other business arrangements manner that permits AIMCO to be qualified as a REIT,
with respect to real estate deemed prudent by the unless AIMCO ceases to qualify as a REIT. The AIMCO
general partner in order to promote the business of the Operating Partnership is authorized to perform any and
partnership, subject, however, to the provisions of all acts for the furtherance of the purposes and
your partnership's agreement of limited partnership. business of the AIMCO Operating Partnership, provided
Additionally, your partnership may engage in any other that the AIMCO Operating Partnership may not take, or
business or do any and all acts and things which may be refrain from taking, any action which, in the judgment
necessary, incidental or convenient to carry on the of its general partner could (i) adversely affect the
partnership's purpose and business as specified above. ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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<PAGE> 1543
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 90,000 units for cash time to the limited partners and to other persons, and
to selected persons who fulfill the requirements set to admit such other persons as additional limited
forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. However, after December No action or consent by the OP Unitholders is required
31, 1984, the general partner is prohibited from admit- in connection with the admission of any additional OP
ting any additional limited partners. Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your general partner may not enter into a funds or other assets to its subsidiaries or other
contract with your partnership that would bind the persons in which it has an equity investment, and such
partnership after the removal of the general partner. persons may borrow funds from the AIMCO Operating
Your general partner may not grant itself or an Partnership, on terms and conditions established in the
affiliate an exclusive listing for the sale of sole and absolute discretion of the general partner. To
partnership assets, purchase or lease real property the extent consistent with the business purpose of the
from the partnership, or sell or lease real property in AIMCO Operating Partnership and the permitted
which the general partner has an interest to the activities of the general partner, the AIMCO Operating
partnership. Your partnership may not lend money to the Partnership may transfer assets to joint ventures,
general partner. The general partner may not make limited liability companies, partnerships,
long-term secured loans to your partners and, on corporations, business trusts or other business
short-term unsecured loans made to your partnership, entities in which it is or thereby becomes a
may not receive interest or other financing charges or participant upon such terms and subject to such
fees in excess of those amounts which would be charged conditions consistent with the AIMCO Operating Part-
by third party financing institutions on comparable nership Agreement and applicable law as the general
loans for the same purpose in the same geographic area partner, in its sole and absolute discretion, believes
(such interest rate per annum will not exceed 2% above to be advisable. Except as expressly permitted by the
the prime rate as charged by Bank of America, N.T. & AIMCO Operating Partnership Agreement, neither the
S.A.). Unless certain conditions are satisfied, the general partner nor any of its affiliates may sell,
general partner may not issue a wrap-around note or transfer or convey any property to the AIMCO Operating
mortgage to your partnership to finance the purchase of Partnership, directly or indirectly, except pursuant to
property. The general partner may not receive any transactions that are determined by the general partner
insurance brokerage fees for issuing any insurance in good faith to be fair and reasonable.
policy to your partnership or any commission for the
placement of mortgages or trust deed loans on your
partnership's properties. Your general partner may not
cause your partnership to enter into any contract with
the general partner to construct or develop properties
or to render any services in connection with such
construction or development. Your general partner may
not cause your partnership to enter into any
transaction with any other real estate program in which
the general partner or any affiliate has an interest.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money, establish a line of credit and issue restrictions on borrowings, and the general partner has
evidences of indebtedness in furtherance of any of the full power and authority to borrow money on behalf of
purposes of your partnership and to secure such debt by the AIMCO Operating Partnership. The AIMCO Operating
mortgage, pledge or other lien on any of the assets of Partnership has credit agreements that restrict, among
your partnership. Your partnership may not incur long- other things, its ability to incur
</TABLE>
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<PAGE> 1544
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
term secured indebtedness with respect to a property of indebtedness. See "Risk Factors -- Risks of Significant
your partnership which exceeds 80% of the then Indebtedness" in the accompanying Prospectus.
appraised value of such property.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
provides that a limited partner upon written request, with a statement of the purpose of such demand and at
after payment of the reasonable expense of duplication such OP Unitholder's own expense, to obtain a current
and for any proper purpose, will be sent a copy of the list of the name and last known business, residence or
certificate or certificates of limited partnership mailing address of the general partner and each other
containing the most recent listing of limited partner OP Unitholder.
names, addresses and capital contributions.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership, subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership. No the right to vote on certain matters described under
limited partner has any authority or right to act for "Comparison of Ownership of Your Units and AIMCO OP
or bind your partnership or participate in or have any Units -- Voting Rights" below. The general partner may
control over your partnership business except as not be removed by the OP Unitholders with or without
required by law. cause.
In addition to the powers granted a general partner of
a limited partnership under applicable law or that are
granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Your general partner and any of its affiliates are Notwithstanding anything to the contrary set forth in
entitled to indemnification for any liability, loss or the AIMCO Operating Partnership Agreement, the general
damage incurred by them or by the partnership by reason partner is not liable to the AIMCO Operating
of any act performed or omitted to be performed by them Partnership for losses sustained, liabilities incurred
in connection with the business of the partnership, or benefits not derived as a result of errors in
including costs and attorney's fees and any amounts judgment or mistakes of fact or law of any act or
expended in the settlements of any claims of liability omission if the general partner acted in good faith.
provided that if such liability arises out of any The AIMCO Operating Partnership Agreement provides for
action or inaction of the general partner such course indemnification of AIMCO, or any director or officer of
of conduct did not constitute fraud, negligence or AIMCO (in its capacity as the previous general partner
misconduct by the general partner. All judgments of the AIMCO Operating Partnership), the general
against the partnership and the general partner, partner, any officer or director of general partner or
wherein the general partner is entitled to the AIMCO Operating Partnership and such other persons
indemnification, must first be satisfied from as the general partner may designate from and against
partnership assets before the general partner is all losses, claims, damages, liabilities, joint or
responsible for these obligations. Notwithstanding the several, expenses (including legal fees), fines,
above paragraph, neither the general partner, nor any settlements and other amounts incurred in connection
affiliate of the general partner
</TABLE>
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<PAGE> 1545
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
or the partnership, will be indemnified from any with any actions relating to the operations of the
liability incurred by them in connection with (1) any AIMCO Operating Partnership, as set forth in the AIMCO
claim or settlement involving allegations that the Operating Partnership Agreement. The Delaware Limited
securities laws were violated by the general partner or Partnership Act provides that subject to the standards
by any such other person unless: (a) the general and restrictions, if any, set forth in its partnership
partner or other persons or entities seeking agreement, a limited partnership may, and shall have
indemnification are successful in defending such the power to, indemnify and hold harmless any partner
action, and (b) such indemnification is specifically or other person from and against any and all claims and
approved by a court of law which is advised as to the demands whatsoever. It is the position of the
current position of any relevant regulatory agencies Securities and Exchange Commission that indemnification
regarding indemnification for securities law of directors and officers for liabilities arising under
violations; or (2) any liability imposed by law, the Securities Act is against public policy and is
including liability for fraud, bad faith or negligence. unenforceable pursuant to Section 14 of the Securities
The general partner has no liability whatsoever to the Act of 1933.
partnership or any limited partner for any loss
suffered by the partnership which arises out of any
action or inaction of the general partner, if the
general partner, in good faith, determined that such
action or inaction was in the best interests of the
partnership and did not constitute negligence or
misconduct of the general partner.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner and elect a successor general partner upon a affairs of the AIMCO Operating Partnership. The general
vote of the limited partners owning a majority of the partner may not be removed as general partner of the
outstanding units. The general partner may admit an AIMCO Operating Partnership by the OP Unitholders with
additional or substitute general partner with the or without cause. Under the AIMCO Operating Partnership
consent of limited partners owning a majority of the Agreement, the general partner may, in its sole
outstanding units. No limited partner may substitute a discretion, prevent a transferee of an OP Unit from
transferee of his units in such limited partner's place becoming a substituted limited partner pursuant to the
without the consent of the general partner which may be AIMCO Operating Partnership Agreement. The general
withheld at the sole discretion of the general partner. partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners (1) to reflect the addition or the general partner may, without the consent of the OP
substitution of limited partners or the reduction of Unitholders, amend the AIMCO Operating Partnership
the capital accounts upon the return of capital to Agreement, amendments to the AIMCO Operating
partners; (2) to add to the representations, duties or Partnership Agreement require the consent of the
obligations of the general partner or affiliates or holders of a majority of the outstanding Common OP
surrender any right or power granted to the general Units, excluding AIMCO and certain other limited
partner or its affiliates herein, for the benefit of exclusions (a "Majority in Interest"). Amendments to
the limited partners; (3) to cure any ambiguity, to the AIMCO Operating Partnership Agreement may be
correct or supplement any provision herein which may be proposed by the general partner or by holders of a
inconsistent with any other provision herein, or to add Majority in Interest. Following such proposal, the
any other provisions with respect to matters or general partner will submit any proposed amendment to
questions arising under your partnership's agreement of the OP Unitholders. The general partner will seek the
limited liability; (4) to delete or add any provision written consent of the OP Unitholders on the proposed
from or to your partnership's agreement of limited amendment or will call a meeting to vote thereon. See
liability requested to be so deleted or added by any "Description of OP Units -- Amendment of the AIMCO
federal or state regulatory agency, which is deemed by Operating Partnership Agreement" in the accompanying
such agency to be for the benefit of the limited Prospectus.
partners. No amendment may be made without the consent
of the affected limited partner if such amendment: (1)
converts the limited partner into a general partner,
(2) eliminates or decreases the limited liability of
the limited partner, (3) alters the interest of a
partner in the allocations or distributions from your
partnership or (4) affects the status of your
partnership as a partnership for Federal income tax
purposes. Other amendments to your partnership's
agreement of limited partnership must be approved by
limited partnership holding a majority of the then
outstanding units.
</TABLE>
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<PAGE> 1546
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Compensation and Fees
<TABLE>
<S> <C>
Your general partner receives 10% of the Cash Available The general partner does not receive compensation for
for Distribution as compensation for its services as its services as general partner of the AIMCO Operating
general partner and may receive reimbursement for Partnership. However, the general partner is entitled
expenses incurred in such capacity. to payments, allocations and distributions in its
capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for any negligence, no OP Unitholder has personal liability for
debts, liabilities, contracts or obligations of your the AIMCO Operating Partnership's debts and
partnership. A limited partner is liable only to make obligations, and liability of the OP Unitholders for
payments of his capital contribution when due under the AIMCO Operating Partnership's debts and obligations
your partnership's agreement of limited partnership. is generally limited to the amount of their invest-
After its capital contribution is fully paid, no ment in the AIMCO Operating Partnership. However, the
limited partner will, except as otherwise required by limitations on the liability of limited partners for
applicable law, be required to make any further capital the obligations of a limited partnership have not been
contributions or lend any funds to your partnership. clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, limited partnership funds may not be partnership agreement, Delaware law generally requires
commingled with the funds of any other person except as a general partner of a Delaware limited partnership to
provided in the partnership agreement. Your general adhere to fiduciary duty standards under which it owes
partner may engage in or possess an interest in any its limited partners the highest duties of good faith,
other business or venture of every nature and fairness and loyalty and which generally prohibit such
description, independently or with others, including general partner from taking any action or engaging in
the ownership, financing, leasing, operation, any transaction as to which it has a conflict of
management, brokerage and development of real property. interest. The AIMCO Operating Partnership Agreement
expressly authorizes the general partner to enter into,
on behalf of the AIMCO Operating Partnership, a right
of first opportunity arrangement and other conflict
avoidance agreements with various affiliates of the
AIMCO Operating Partnership and the general partner, on
such terms as the general partner, in its sole and
absolute discretion, believes are advisable. The AIMCO
Operating Partnership Agreement expressly limits the
liability of the general partner by providing that the
general partner, and its officers and directors will
not be liable or accountable in damages to the AIMCO
Operating Partnership, the limited partners or
assignees for errors in judgment or mistakes of fact or
law or of any act or omission if the general partner or
such director or officer acted in good faith. See
"Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
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<PAGE> 1547
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
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<PAGE> 1548
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; extend the term of Prospectus. So long as any institution of bankruptcy
your partnership; remove or elect a Preferred OP Units are outstand- proceedings, an assignment for the
general partner; and approve or ing, in addition to any other vote benefit of creditors and certain
disapprove the sale of all or or consent of partners required by transfers by the general partner of
substantially all of the assets of law or by the AIMCO Operating its interest in the AIMCO Operating
your partnership. Partnership Agreement, the Partnership or the admission of a
affirmative vote or consent of successor general partner.
A general partner may cause the holders of at least 50% of the
dissolution of your partnership by outstanding Preferred OP Units will Under the AIMCO Operating Partner-
retiring. Your partnership may be be necessary for effecting any ship Agreement, the general partner
continued by the remaining general amendment of any of the provisions has the power to effect the
partner or, if none, the limited of the Partnership Unit Desig- acquisition, sale, transfer,
partners may agree to continue your nation of the Preferred OP Units exchange or other disposition of
partnership by electing a successor that materially and adversely any assets of the AIMCO Operating
general partner upon the vote of affects the rights or preferences Partnership (including, but not
the limited partners owning a of the holders of the Preferred OP limited to, the exercise or grant
majority of the units within 120 Units. The creation or issuance of of any conversion, option,
days after the retirement of the any class or series of partnership privilege or subscription right or
general partner. units, including, without any other right available in
limitation, any partnership units connection with any assets at any
that may have rights senior or time held by the AIMCO Operating
superior to the Preferred OP Units, Partnership) or the merger,
shall not be deemed to materially consolidation, reorganization or
adversely affect the rights or other combination of the AIMCO
preferences of the holders of Operating Partnership with or into
Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations, sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
The distributions payable to the $ per Preferred OP Unit; tribute quarterly all, or such
partners are not fixed in amount provided, however, that at any time portion as the general partner may
and depend upon the operating and in its sole and abso-
</TABLE>
S-66
<PAGE> 1549
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
results and net sales of from time to time on or after the lute discretion determine, of
refinancing proceeds available from fifth anniversary of the issue date Available Cash (as defined in the
the disposition of your of the Preferred OP Units, the AIMCO Operating Partnership
partnership's assets. AIMCO Operating Partnership may Agreement) generated by the AIMCO
adjust the annual distribution rate Operating Partnership during such
on the Preferred OP Units to the quarter to the general partner, the
lower of (i) % plus the annual special limited partner and the
interest rate then applicable to holders of Common OP Units on the
U.S. Treasury notes with a maturity record date established by the
of five years, and (ii) the annual general partner with respect to
dividend rate on the most recently such quarter, in accordance with
issued AIMCO non-convertible their respective interests in the
preferred stock which ranks on a AIMCO Operating Partnership on such
parity with its Class H Cumu- record date. Holders of any other
lative Preferred Stock. Such Preferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may assign one or There is no public market for the There is no public market for the
more whole units by a written Preferred OP Units and the OP Units. The AIMCO Operating Part-
instrument in accordance with your Preferred OP Units are not listed nership Agreement restricts the
partnership's agreement of limited on any securities exchange. The transferability of the OP Units.
partnership. In order for an Preferred OP Units are subject to Until the expiration of one year
assignee to become a substituted restrictions on transfer as set from the date on which an OP
limited partner the following forth in the AIMCO Operating Unitholder acquired OP Units,
conditions must first be satisfied: Partnership Agreement. subject to certain exceptions, such
(1) the filing with the partnership OP Unitholder may not transfer all
of a written instrument of as- Pursuant to the AIMCO Operating or any portion of its OP Units to
signment covering no less than five Partnership Agreement, until the any transferee without the consent
units; (2) the execution by the expiration of of the gen-
assignor and
</TABLE>
S-67
<PAGE> 1550
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
assignee of any other documentation one year from the date on which a eral partner, which consent may be
required or requested by the holder of Preferred OP Units withheld in its sole and absolute
general partner; (3) the written acquired Preferred OP Units, discretion. After the expiration of
consent of the general partner is subject to certain exceptions, such one year, such OP Unitholder has
obtained; and (4) a transfer fee holder of Preferred OP Units may the right to transfer all or any
covering all reasonable expenses not transfer all or any portion of portion of its OP Units to any
connected with such substitution is its Preferred OP Units to any person, subject to the satisfaction
paid to the partnership. transferee without the consent of of certain conditions specified in
the general partner, which consent the AIMCO Operating Partnership
may be withheld in its sole and Agreement, including the general
absolute discretion. After the partner's right of first refusal.
expiration of one year, such See "Description of OP Units --
holders of Preferred OP Units has Transfers and Withdrawals" in the
the right to transfer all or any accompanying Prospectus.
portion of its Preferred OP Units
to any person, subject to the After the first anniversary of
satisfaction of certain conditions becoming a holder of Common OP
specified in the AIMCO Operating Units, an OP Unitholder has the
Partnership Agreement, including right, subject to the terms and
the general partner's right of conditions of the AIMCO Operating
first refusal. Partnership Agreement, to require
the AIMCO Operating Partnership to
After a one-year holding period, a redeem all or a portion of the
holder may redeem Preferred OP Common OP Units held by such party
Units and receive in exchange in exchange for a cash amount based
therefor, at the AIMCO Operating on the value of shares of Class A
Partnership's option, (i) subject Common Stock. See "Description of
to the terms of any Senior Units, OP Units -- Redemption Rights" in
cash in an amount equal to the the accompanying Prospectus. Upon
Liquidation Preference of the receipt of a notice of redemption,
Preferred OP Units tendered for the AIMCO Operating Partnership
redemption, (ii) a number of shares may, in its sole and absolute
of Class I Cumulative Preferred discretion but subject to the
Stock of AIMCO that pay an restrictions on the ownership of
aggregate amount of dividends yield Class A Common Stock imposed under
equivalent to the distributions on AIMCO's charter and the transfer
the Preferred OP Units tendered for restrictions and other limitations
redemption and are part of a class thereof, elect to cause AIMCO to
or series of preferred stock that acquire some or all of the tendered
is then listed on the New York Common OP Units in exchange for
Stock Exchange or another national Class A Common Stock, based on an
securities exchange, or (iii) a exchange ratio of one share of
number of shares of Class A Common Class A Common Stock for each Com-
Stock of AIMCO that is equal in mon OP Unit, subject to adjustment
Value to the Liquidation Preference as provided in the AIMCO Operating
of the Preferred OP Units tendered Partnership Agreement.
for redemption. The Preferred OP
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
S-68
<PAGE> 1551
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
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Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee equal to 10% of your
partnership's cash available for distribution for its services as general
partner and may receive reimbursement for expenses generated in such capacity.
The general partner received such fees and reimbursements totaling $187,000,
$179,000 and $82,000 in 1996, 1997 and the first six months of 1998,
respectively. The property manager received management fees of $737,000 in 1996,
$740,000 in 1997 and $405,000 for the first six months of 1998. The AIMCO
Operating Partnership has no current intention of changing the fee structure for
the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-77
<PAGE> 1560
YOUR PARTNERSHIP
GENERAL
Century Properties Fund XIX was organized on August 6, 1982, under the laws
of the State of California. Its primary business is real estate ownership and
related operations. Your partnership was formed for the purpose of making
investments in various types of real properties which offer potential capital
appreciation and cash distributions to its limited partners. Your partnership's
investment portfolio currently consists of the following eight residential
apartment complexes: Wood Lake Apartments, a 220-unit complex in Atlanta,
Georgia; Greenspoint Apartments, a 336-unit complex in Phoenix, Arizona;
Sandspoint Apartments, a 432-unit complex in Phoenix, Arizona; Vinings Peak
Apartments, a 280-unit complex in Atlanta, Georgia; Plantation Crossing
Apartments, a 180-unit complex in Atlanta, Georgia; Sunrunner Apartments, a
200-unit complex in St. Petersburg, Florida; McMillan Place Apartments, a
402-unit complex in Dallas, Texas; and Misty Woods Apartments, a 228-unit
complex in Charlotte, North Carolina. The general partner of your partnership is
Fox Partners II, which is a majority-owned subsidiary of AIMCO. The executive
officers and directors of the general partner are the same as those of the AIMCO
GP, which are set forth in Appendix B hereto. NPI-AP Management LP, which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
your partnership. As of December 31, 1997, there were 89,292 units issued and
outstanding, which were held of record by 5,900 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated September 20, 1983, by which units in
your partnership were originally offered, the general partner of your
partnership (which at the time was not affiliated with AIMCO) anticipated your
partnership would sell its properties after five to eight years of ownership.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2007, unless sooner terminated as
provided in the agreement or by law. Limited partners could, as an alternative
to tendering their units, take a variety of possible actions, including voting
to liquidate the partnership or amending the agreement of limited partnership to
authorize limited partners to cause the partnership to merge with another entity
or engage in a "roll-up" or similar transaction.
S-78
<PAGE> 1561
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner is not liable to the
partnership for any loss suffered by the partnership which arises out of any
action or inaction of the general partner, if the general partner, in good
faith, determined that such action or inaction was in the best interests of the
partnership and did not constitute negligence or misconduct of the general
partner. As a result, unitholders might have a more limited right of action in
certain circumstances than they would have in the absence of such a provision in
your partnership's agreement of limited partnership. The general partner of your
partnership is majority-owned by AIMCO. See "Conflicts of Interest".
Your general partner and any of its affiliates are entitled to
indemnification for any liability, loss or damage incurred by them or by the
partnership by reason of any act performed or omitted to be performed by them in
connection with the business of the partnership, including costs and attorney's
fees and any amounts expended in the settlements of any claims of liability
provided that if such liability arises out of any action or inaction of the
general partner such conduct did not constitute fraud, negligence or misconduct
by the general partner. All judgments against the partnership and the general
partner, wherein the general partner is entitled to indemnification, must first
be satisfied from partnership assets before the general partner is responsible
for these obligations. Notwithstanding the above paragraph, neither the general
partner, nor any affiliate of the general partner or the partnership, will be
indemnified from any liability incurred by them in connection with (1) any claim
or settlement involving allegations that the securities laws were violated by
the general partner or by any such other person unless: (a) the general partner
or other persons or entities seeking indemnification are successful in defending
such action, and (b) such indemnification is specifically approved by a court of
law which is advised as to the current position of any relevant regulatory
agencies regarding indemnification for securities law violations; or (2) any
liability imposed by law, including liability for fraud, bad faith or
negligence.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
S-79
<PAGE> 1562
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $1,000.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 0.00
January 1, 1996 - December 31, 1996......................... 0.00
January 1, 1997 - December 31, 1997......................... 0.00
January 1, 1998 - June 30, 1998............................. 20.02
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 35.6% interest in your partnership, including 29,938.66 units held by us and
the interest held by Fox Partners II, as general partner of your partnership.
Except as set forth above, neither the AIMCO Operating Partnership, nor, to the
best of its knowledge, any of its affiliates, (i) beneficially own or have a
right to acquire any units, (ii) have effected any transactions in the units in
the past 60 days, or (iii) have any contract, arrangement, understanding or
relationship with any other person with respect to any securities of your
partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning transfer or voting thereof, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $130,000
1995........................................................ 231,000
1996........................................................ 187,000
1997........................................................ 179,000
1998 (through June 30)...................................... 82,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- --------
<S> <C>
1994........................................................ $557,000
1995........................................................ 592,000
1996........................................................ 617,000
1997........................................................ 645,000
1998 (through June 30)...................................... 335,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-80
<PAGE> 1563
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-81
<PAGE> 1564
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Century Properties Fund XIX
appearing in Century Properties Fund XIX Annual Report (Form 10-KSB) for the
year ended December 31, 1997, have been audited by Imowitz Koenig & Co., LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
S-82
<PAGE> 1565
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: Century Properties Fund XIX
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
Century Properties Fund XIX (the "Partnership") (the Purchaser, AIMCO, the
General Partner and other affiliates and subsidiaries of AIMCO are referred to
herein collectively as the "Company"), is contemplating a transaction (the
"Offer") in which a minority of the outstanding limited partnership interests in
the Partnership (the "Units") will be acquired by the Purchaser in exchange for
an offer price per Unit of $ in cash, or Common OP Units of the
Purchaser, or Preferred OP Units of the Purchaser, or a combination of
any of such forms of consideration. The limited partners of the Partnership (the
"Limited Partners") will have the choice to maintain their current interest in
the Partnership or exchange their Units for any or a combination of such forms
of consideration. The amount of cash, Common OP Units or Preferred OP Units
offered per Unit is referred to herein as the "Offer Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 1566
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1567
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 1568
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1569
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1570
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1571
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1572
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1573
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1574
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CENTURY PROPERTIES GROWTH FUND XXII
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. In December 31, 1996, an affiliate of
your general partner estimated the net asset value of your units to be
$488.00 per unit and as of June 30, 1997, an affiliate of your general
partner estimated the net liquidation value of your units to be $412.22
per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few apartment properties to holding an
interest in our large portfolio of properties. In the future, the
properties owned by your partnership may outperform our portfolio of
assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1575
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Century
Properties Growth Fund XXII................ S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-56
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-64
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
</TABLE>
i
<PAGE> 1576
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-77
Originally Anticipated Term of the
Partnership................................ S-77
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-78
Property Management.......................... S-78
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-78
Distributions................................ S-79
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-79
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-80
LEGAL MATTERS.................................. S-81
EXPERTS........................................ S-81
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1577
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Century Growth Fund XXII. For each unit that you tender, you may choose to
receive of our Tax-Deferral % Partnership Preferred
Units (also referred to as "Preferred OP Units"), of our
Tax-Deferral Partnership Common Units (also referred to as "Common OP
Units"), or $ in cash (subject, in each case to adjustment for any
distributions paid to you during the offer period). If you like, you can
choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in Fox Partners IV, the
managing general partner of your partnership (the "general partner"), and
the company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1578
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1579
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership did not pay any distributions since January 1, 1997. We
will pay fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units. In the last five
years, your partnership only made distributions in 1996.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1580
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $75.00 per unit to $400.00 per unit
from January 1, 1997 to September 30, 1998. As of December 31, 1996, an
affiliate of your general partner estimated the net asset value of your
units to be $488.00 per unit and as of June 30, 1997, an affiliate of your
general partner estimated the net liquidation value of your units to be
$412.22 per unit. However, we do not believe that these valuations
represent the current fair market value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 1581
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of 5
units. You may tender fractional units only if you are tendering all of
your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 1582
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 1583
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 1584
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of December
31, 1996, an affiliate of your general partner estimated the net asset value of
your units to be $488.00 per unit and as of June 30, 1997, an affiliate of your
general partner estimated the net liquidation value of your units to be $412.22
per unit. However, we do not believe that these valuations represent the current
fair market value of your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $75.00 per unit to $400.00 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
S-8
<PAGE> 1585
deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
S-9
<PAGE> 1586
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
S-10
<PAGE> 1587
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
27.03% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in significant amounts of
taxable income to you and your partners. Another option for liquidation of
your
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investment would be to sell your units in a private transaction. Any such
sale could be at a very substantial discount from your pro rata share of
the fair market value of your partnership's property and might involve
significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
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In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $75.00 to $400.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner. Also, your partnership is limited as to the number of limited partner
interests it may issue while the AIMCO Operating Partnership has no such
limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to 10% of your partnership's cash available for
distribution for its services as general partner and may also receive
reimbursement for expenses generated in such capacity. For the first six months
of 1998, your general partner received total fees and reimbursements of $82,000.
The property manager received management fees of $534,000 for the first six
months of 1998. We have no current intention of changing the fee structure for
your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Century Properties Growth Fund XXII was organized on January 31, 1984,
under the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital
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appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following nine
residential apartment complexes: Wood Creek Apartments, a 432-unit complex in
Mesa, Arizona; Plantation Creek Apartments, a 484-unit complex in Atlanta,
Georgia; Stoney Creek Apartments, a 364-unit complex in Dallas, Texas; Four Wind
Apartments, a 350-unit complex in Overland Park, Kansas; Promontory Point
Apartments, a 252-unit complex in Austin, Texas; Cooper's Pointe Apartments, a
192-unit complex in Charleston, South Carolina; Hampton Greens Apartments, a
309-unit complex in Dallas, Texas, Autumn Run Apartments, a 320-unit complex in
Naperville, Illinois; and Copper Mill Apartments, a 192-unit complex in
Richmond, Virginia. The general partner of your partnership is Fox Partners IV,
which is a majority-owned subsidiary of AIMCO. NPI-AP Management L.P., which is
a majority-owned subsidiary of AIMCO, serves as manager of the properties owned
by your partnership. As of December 31, 1997, there were 82,848 units of limited
partnership interest issued and outstanding, which were held of record by 5,471
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
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SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1597
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1598
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1599
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1600
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1601
SUMMARY FINANCIAL INFORMATION OF CENTURY PROPERTIES GROWTH FUND XXII
The summary financial information of Century Properties Growth Fund XXII
for the six months ended June 30, 1998 and 1997 is unaudited. The summary
financial information for Century Properties Growth Fund XXII for the years
ended December 31, 1997, 1996 and 1995 is based on audited financial statements.
This information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
CENTURY PROPERTIES GROWTH FUND XXII
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------ -----------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
IN THOUSANDS, EXCEPT UNIT DATA
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $10,761 $10,182 $20,997 $20,390 $22,710
Net Income (Loss)........................................... 932 431 391 (1,058)(a) 286(a)
Net Income (Loss) per limited partnership unit.............. 9.92 4.59 4.16 (16.38) (5.13)
Distributions per limited partnership unit.................. -- -- -- 30.76 --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------ -----------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $77,487 $80,157 $78,890 $81,547 $84,052
Total Assets................................................ 88,689 87,137 86,809 87,368 91,348
Notes Payable............................................... 73,462 72,890 72,603 73,164 74,111
Partners' Capital (Deficit)................................. 12,955 12,063 12,023 11,632 15,772
</TABLE>
- ---------------
(a) Net income before extraordinary items.
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CENTURY PROPERTIES
PARTNERSHIP GROWTH FUND XXII
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $ 0.00 $0.00
</TABLE>
S-25
<PAGE> 1602
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $75.00 per unit to
$400.00 per unit from January 1, 1997 to September 30, 1998. As of December 31,
1996, an affiliate of your general partner estimated the net asset value of your
units to be $488.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1997, an affiliate of your general partner
estimated the net liquidation value of your units to be $412.22 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
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ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
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<PAGE> 1604
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Your
partnership did not pay distributions with respect to your units for the six
months ended June 30, 1998. Therefore, distributions with respect to the
Preferred OP Units and Common OP Units that we are offering are expected to be
, immediately following our offer, than the distributions with respect to
your units. In the last five years, your partnership made distributions only in
1996. See "Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
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RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in NPI-AP Management L.P.,
which manages the properties owned by your partnership. Through subsidiaries,
AIMCO currently owns, in the aggregate, approximately a 27.03% interest in your
partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
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<PAGE> 1606
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In August, 1997, IPLP Acquisition I LLC, then
an affiliate of Insignia and now our affiliate, commenced a tender offer
pursuant to which it acquired 5,504 units (representing approximately 6.6% of
the number outstanding) at a cash purchase price of $275 per unit on October 6,
1997.
Prior to such tender offer, DeForest Ventures I, L.P., which was
unaffiliated with Insignia and is not affiliated with AIMCO, commenced tender
offers for $87.80 per unit and purchased 17,022.5 shares between October 1994
and June 1995.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
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<PAGE> 1607
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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<PAGE> 1608
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 1609
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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<PAGE> 1610
, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of 5 units. You may tender fractional units only if you are
tendering all of your units. No alternative, conditional or contingent tenders
will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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<PAGE> 1611
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for income tax purposes. This provision may limit sales of units in the
secondary market and in private transactions for the twelve-month period
following completion of this offer. The general partner of your partnership has
advised the AIMCO Operating Partnership that it will not process any requests
for recognition of substitution of limited partners upon a transfer of units
during such twelve-month period which the general partner believes may cause a
tax termination in contravention of the agreement of limited partnership. The
AIMCO Operating Partnership took this restriction into account in determining
the maximum number of units for which this offer is made. Based on the general
partner's records, approximately 6,117 units in your partnership have been
transferred during the twelve months ended December 31, 1997 (representing
approximately 7.38% of the outstanding units). As a result, the AIMCO Operating
Partnership does not believe that this restriction will preclude it from
acquiring the maximum number of units for which this offer is made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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<PAGE> 1620
filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in of the limited partnerships for which subsidiaries of IPT act as
general partner (including your partnership) filed a complaint in the Superior
Court of the State of California, County of Los Angeles against Insignia, the
partnerships, the general partners (including your general partner) and
additional entities affiliated with several of the defendants. Plaintiffs allege
that they have requested from, but have been denied by each of the partnerships,
lists of their respective limited partners for the purpose of making tender
offers to purchase up to 4.9% of the units of limited partnership interest in
each of the partnerships. The complaint also alleges that certain of the
defendants made tender offers to purchase units of limited partnership interest
in many of the partnerships, with the alleged result that plaintiffs have been
deprived of the benefits they would have realized from ownership of the
additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint has been filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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<PAGE> 1622
pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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<PAGE> 1623
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
- -------- ---------------- -------------- --------------
<S> <C> <C> <C>
Wood Creek Apartments..................... $ % $
Plantation Creek Apartments...............
Stoney Creek Apartments...................
Four Winds Apartments.....................
Promontory Point Apartments...............
Cooper's Pointe Apartments................
Hampton Greens Apartments.................
Autumn Run Apartments.....................
Cooper Mill Apartments....................
</TABLE>
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<PAGE> 1625
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
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<PAGE> 1626
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would
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<PAGE> 1627
receive in exchange for each of your partnership's units. Distributions
with respect to your units for the six months ended June 30, 1998 were
$0.00. Therefore, distributions with respect to the Preferred OP Units and
Common OP Units that we are offering are expected to be ,
immediately following our offer, than the distributions with respect to
your units. See "Comparison of Ownership of Your Units and AIMCO OP
Units -- Distributions." In the last five years, your partnership has only
made distribution in 1996.
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
partner of your partnership and the AIMCO Operating Partnership believe that the
valuation method described in "Valuation of Units" provides a meaningful
indication of value for residential apartment properties although there are
other ways to value real estate. A liquidation in the future might generate a
higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
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<PAGE> 1628
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar apartment properties, the manner in which
your partnership's property is sold and changes in availability of capital to
finance acquisitions of apartment properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $75.00 to $400.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from July 1, 1995 to
September 30, 1998 an aggregate of 919 units (representing approximately 1.2% of
the total outstanding units) was transferred in sale transactions. Set forth in
the table below are the high and low sales prices of units for the quarterly
periods from July 1, 1996 to September 30, 1998, as reported by the general
partner and by The Partnership Spectrum, which is an independent, third-party
source. The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported prices; thus the AIMCO Operating
Partnership does not know whether the information compiled by The Partnership
Spectrum is accurate or complete. The transfer paperwork submitted to the
general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
S-52
<PAGE> 1629
CENTURY PROPERTIES GROWTH FUND XXII
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $ 100.00 $ 400.00 $ (c) $ (c)
Second Quarter.................................. 75.00 275.00 N/A N/A
First Quarter................................... 115.00 267.57 N/A N/A
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 185.00 200.00 N/A N/A
Third Quarter................................... 120.00 244.00 N/A N/A
Second Quarter.................................. 133.00 257.00 181.00 261.00
First Quarter................................... 126.10 153.30 144.00 210.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 115.00 115.00 167.00 187.00
Third Quarter................................... N/A N/A 79.00 130.00
Second Quarter.................................. N/A N/A -- --
First Quarter................................... N/A N/A -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve
S-53
<PAGE> 1630
additional selling expenses of % of the sale proceeds. The general partner of
your partnership believes this is a normal and customary cost of property sales.
The liquidation analysis also assumed that your partnership's property was sold
to an independent third-party buyer at the current property value and that other
balance sheet assets (excluding amortizing assets) and liabilities of your
partnership were sold at their book value, and that the net proceeds of sale
were allocated to your partners in accordance with your partnership's agreement
of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Certain of your partnership's properties have been appraised in
the past several years by an independent, third party appraiser, Koeppel Tener
Real Estate Services, Inc. (the "Appraiser"), in connection with a refinancing
of those properties. According to the appraisal report, the scope of the
appraisal included an inspection of each property and an analysis of the
surrounding markets. The Appraiser relied principally on the income
capitalization approach to valuation and secondarily on the sales comparison
approach, and represented that its report was prepared in accordance with the
Code of Professional Ethics and Standards of Professional Appraisal Practice of
the Appraisal Institute and the Uniform Standards of Professional Appraisal
Practice, and in compliance with the Appraisal Standards set forth in the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (known as
"FIRREA"). The estimated market value of the fee simple estate of the properties
were as follows:.
<TABLE>
<CAPTION>
PROPERTY NAME APPRAISED VALUE DATE OF APPRAISAL
------------- --------------- -----------------
<S> <C> <C>
Autumn Run Apartments....................................... $17,250,000 April 12, 1996
Cooper's Pointe Apartments.................................. 5,700,000 January 4, 1996
Copper Mill Apartments...................................... 9,700,000 December 7, 1995
Hampton Greens Apartments................................... 7,800,000 November 2, 1995
Plantation Creek Apartments................................. 21,296,000 December 12, 1995
Promontory Point Apartments................................. 9,300,000 November 9, 1995
Stoney Creek Apartments..................................... 10,200,000 November 10, 1995
Wood Creek Apartments....................................... 17,500,000 November 9, 1995
</TABLE>
A copy of the summary of the appraisal has been filed as an exhibit to the AIMCO
Operating Partnership's Tender Offer Statement on Schedule 14D-1 filed with the
SEC.
Estimate of Net Asset Value in Connection with Insignia Property Trust
Formation. In connection with the formation of IPT, Insignia prepared estimates
of the value of your partnership's properties and of a unit as of December 31,
1996. Insignia estimated the aggregate value of your partnership properties to
be $112,428,109 and the asset value of a unit to be $488. However, since
December 1996, the operating performance of your partnership's properties have
changed, the current assets of your partnership has changed and your
partnership's properties have increased in value.
Therefore, the AIMCO Operating Partnership believes that this estimate of
net asset value per unit does not necessarily represent either the fair market
value of a unit or the amount a limited partner reasonably could expect to
receive if the partnership's properties were sold and the partnership was
liquidated. For this reason, the AIMCO Operating Partnership considered this net
asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
S-54
<PAGE> 1631
Estimate of Net Liquidation Value in Connection with the Previous Tender
Offer by an Affiliate. In connection with the August 1997 tender offer by an
affiliate of your general partner, the affiliate estimated the net liquidation
value of a unit (as of June 30, 1997) to be $412.22. This net liquidation value
estimate was based on a hypothetical sale of all of your partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the partnership's cash, proceeds from temporary investments, and all other
assets that are believed to have liquidation value, after provision in full for
all of the partnership's other known liabilities. This net liquidation value
estimate did not take into account (i) timing considerations or (ii) costs
associated with winding up your partnership. Therefore, the AIMCO Operating
Partnership believes that this estimate of the net liquidation value of a unit
does not necessarily represent either the fair market value of a unit or the
amount a limited partner reasonably could expect to receive if the partnership's
properties were sold and the partnership was liquidated. For this reason, the
AIMCO Operating Partnership considered this net asset value estimate to be less
meaningful in determining the offer consideration than the analysis described
above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
S-55
<PAGE> 1632
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership
S-56
<PAGE> 1633
and discussed with management the current and anticipated operating results of
your partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
S-57
<PAGE> 1634
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-58
<PAGE> 1635
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP
AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Cash Available For Distribution (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2010. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership was formed to invest in, acquire, The purpose of the AIMCO Operating Partnership is to
manage and ultimately sell income producing real conduct any business that may be lawfully conducted by
properties which are improved or capable of improvement a limited partnership organized pursuant to the
or which will be improved within a reasonable period Delaware Revised Uniform Limited Partnership Act (as
after acquisition and to make, service and ultimately amended from time to time, or any successor to such
dispose of mortgage loans on income producing real statute) (the "Delaware Limited Partnership Act"),
properties. Your partnership may enter into ventures, provided that such business is to be conducted in a
partnerships, REIT's and other business arrangements manner that permits AIMCO to be qualified as a REIT,
with respect to real estate deemed prudent by the unless AIMCO ceases to qualify as a REIT. The AIMCO
general partner in order to promote the business of the Operating Partnership is authorized to perform any and
partnership, subject, however, to the provisions of all acts for the furtherance of the purposes and
your partnership's agreement of limited partnership. business of the AIMCO Operating Partnership, provided
Additionally, your partnership may engage in any other that the AIMCO Operating Partnership may not take, or
business or do any and all acts and things which may be refrain from taking, any action which, in the judgment
necessary, incidental or convenient to carry on the of its general partner could (i) adversely affect the
partnership's purpose and business as specified above. ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
S-59
<PAGE> 1636
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 120,000 units for time to the limited partners and to other persons, and
cash to selected persons who fulfill the requirements to admit such other persons as additional limited
set forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. However, after June 30, No action or consent by the OP Unitholders is required
1986, the general partner is prohibited from admitting in connection with the admission of any additional OP
any additional limited partners. Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, your general partner may not enter into a funds or other assets to its subsidiaries or other
contract with your partnership that would bind the persons in which it has an equity investment, and such
partnership after the removal of the general partner. persons may borrow funds from the AIMCO Operating
Your general partner may not grant itself or an Partnership, on terms and conditions established in the
affiliate an exclusive listing for the sale or sole and absolute discretion of the general partner. To
partnership assets, purchase or lease real property the extent consistent with the business purpose of the
from the partnership, or sell or lease real property in AIMCO Operating Partnership and the permitted
which the general partner has an interest to the activities of the general partner, the AIMCO Operating
partnership. Your partnership may not make loans to the Partnership may transfer assets to joint ventures,
general partner or its affiliates but the general limited liability companies, partnerships,
partner may short-term unsecured loan to your corporations, business trusts or other business
partnership if the general partner does not receive entities in which it is or thereby becomes a
interest or financing charges in excess of the lesser participant upon such terms and subject to such
of (1) those amounts which would be charged by third- conditions consistent with the AIMCO Operating Part-
party financing institution of comparable loans for the nership Agreement and applicable law as the general
same purpose in the same geographic area or (2) 2% partner, in its sole and absolute discretion, believes
above the prime lending rate established by Bank of to be advisable. Except as expressly permitted by the
America, N.T. & S.A. The general partner may not make AIMCO Operating Partnership Agreement, neither the
loans encumbering your partnership's properties, the general partner nor any of its affiliates may sell,
principal amount of which is scheduled to be paid over transfer or convey any property to the AIMCO Operating
a period of not less than 48 months and not more than Partnership, directly or indirectly, except pursuant to
50% of the principal amount of which is scheduled to be transactions that are determined by the general partner
paid during the first 24 months. The general partner in good faith to be fair and reasonable.
also may not make wrap-around notes and mortgages to
your partnership to finance the purchase of property.
The general partner may not receive insurance brokerage
fees for any insurance policy issued to your
partnership or commission or fees for the placement of
mortgage or trust deed loans properties. The general
partner may not cause your partnership to enter into
any contract with the general partner to construct or
develop properties or to render any services in
connection with such construction or development. Your
general partner may not cause your partnership to enter
into any transaction with any other real estate program
in which the general partner or any affiliate has an
interest, subject to your partnership's agreement of
limited partnership.
</TABLE>
S-60
<PAGE> 1637
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to borrow money, establish a line of credit and issue restrictions on borrowings, and the general partner has
evidences of indebtedness in furtherance of any of the full power and authority to borrow money on behalf of
purposes of your partnership and to secure such debt by the AIMCO Operating Partnership. The AIMCO Operating
mortgage, pledge or other lien on any of the assets of Partnership has credit agreements that restrict, among
your partnership. Your partnership may not incur long- other things, its ability to incur indebtedness. See
term secured indebtedness with respect to a property "Risk Factors -- Risks of Significant Indebtedness" in
which exceeds 80% of the then-appraised value of such the accompanying Prospectus.
property.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
provides that a limited partner upon written request, with a statement of the purpose of such demand and at
after payment of the reasonable expense of duplication such OP Unitholder's own expense, to obtain a current
and for any proper purpose, will be sent a copy of the list of the name and last known business, residence or
certificate or certificates of limited partnership mailing address of the general partner and each other
containing the most recent listing of limited partner OP Unitholder.
names, addresses and capital contributions.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership. Subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership, the right to vote on certain matters described under
the general partner, on behalf of your partnership, may "Comparison of Ownership of Your Units and AIMCO OP
take any action it deems necessary or advisable in Units -- Voting Rights" below. The general partner may
connection with the business of your partnership not be removed by the OP Unitholders with or without
without the consent of the limited partners. No limited cause.
partner has any authority or right to act for or bind
your partnership or participate in or have any control In addition to the powers granted a general partner of
over your partnership business except as required by a limited partnership under applicable law or that are
law. granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Your general partner and any of its affiliates are Notwithstanding anything to the contrary set forth in
entitled to indemnification for any liability, loss or the AIMCO Operating Partnership Agreement, the general
damage incurred by them or by the partnership by reason partner is not liable to the AIMCO Operating
of any act performed or omitted to be performed by them Partnership for losses sustained, liabilities incurred
in connection with the business of the partnership, or benefits not derived as a result of errors in
including costs and attorney's fees and any amounts judgment or mistakes of fact or law of any act or
expended in the settlements of any claims of liability omission if the general partner acted in good faith.
provided that if such liability arises out of any The AIMCO Operating Partnership Agreement provides for
action or inaction of the general partner such course indemnification of AIMCO, or any director or officer of
of conduct did not constitute fraud, negligence or AIMCO (in its capacity as the previous general partner
misconduct by the general partner. All judgments of the AIMCO Operating Partnership),
</TABLE>
S-61
<PAGE> 1638
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
against the partnership and the general partner, the general partner, any officer or director of general
wherein the general partner is entitled to partner or the AIMCO Operating Partnership and such
indemnification, must first be satisfied from other persons as the general partner may designate from
partnership assets before the general partner is and against all losses, claims, damages, liabilities,
responsible for these obligations. Notwithstanding the joint or several, expenses (including legal fees),
above paragraph, neither the general partner, nor any fines, settlements and other amounts incurred in
affiliate of the general partner or the partnership, connection with any actions relating to the operations
will be indemnified from any liability incurred by them of the AIMCO Operating Partnership, as set forth in the
in connection with (1) any claim or settlement AIMCO Operating Partnership Agreement. The Delaware
involving allegations that the securities laws were Limited Partnership Act provides that subject to the
violated by the general partner or by any such other standards and restrictions, if any, set forth in its
person unless: (a) the general partner or other persons partnership agreement, a limited partnership may, and
or entities seeking indemnification are successful in shall have the power to, indemnify and hold harmless
defending such action, and (b) such indemnification is any partner or other person from and against any and
specifically approved by a court of law which is all claims and demands whatsoever. It is the position
advised as to the current position of any relevant of the Securities and Exchange Commission that
regulatory agencies regarding indemnification for indemnification of directors and officers for
securities law violations; or (2) any liability imposed liabilities arising under the Securities Act is against
by law, including liability for fraud, bad faith or public policy and is unenforceable pursuant to Section
negligence. The general partner has no liability 14 of the Securities Act of 1933.
whatsoever to the partnership or any limited partner
for any loss suffered by the partnership which arises
out of any action or inaction of the general partner,
if the general partner, in good faith, determined that
such action or inaction was in the best interests of
the partnership and did not constitute negligence or
misconduct of the general partner.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove a general has exclusive management power over the business and
partner and elect a successor general partner upon a affairs of the AIMCO Operating Partnership. The general
vote of the limited partners owning a majority of the partner may not be removed as general partner of the
outstanding units. The general partner may admit an AIMCO Operating Partnership by the OP Unitholders with
additional or substitute general partner with the or without cause. Under the AIMCO Operating Partnership
consent of limited partners owning a majority of the Agreement, the general partner may, in its sole
outstanding units. No limited partner may substitute a discretion, prevent a transferee of an OP Unit from
transferee of his units in such limited partner's place becoming a substituted limited partner pursuant to the
without the consent of the general partner which may be AIMCO Operating Partnership Agreement. The general
withheld at the sole discretion of the general partner. partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners (1) to reflect the addition or the general partner may, without the consent of the OP
substitution of limited partners or the reduction of Unitholders, amend the AIMCO Operating Partnership
the capital accounts upon the return of capital to Agreement, amendments to the AIMCO Operating
partners; (2) to add to the representations, duties or Partnership Agreement require the consent of the
obligations of the general partner or affiliates or holders of a majority of the outstanding Common OP
surrender any right or power granted to the general Units, excluding AIMCO and certain other limited
partner or its affiliates herein, for the benefit of exclusions (a "Majority in Interest"). Amendments to
the limited partners; (3) to cure any ambiguity, to the AIMCO Operating Partnership Agreement may be
correct or supplement any provision herein which may be proposed by the general partner or by holders of a
inconsistent with any other provision herein, or to add Majority in Interest. Following such proposal, the
any other provisions with respect to matters or general partner will submit any proposed amendment to
questions arising under your partnership's agreement of the OP Unitholders. The general partner will seek the
limited partnership; and (4) to delete or add any written consent of the OP Unitholders on the proposed
provision from or to your partnership's agreement of amendment or will call a meeting to vote thereon. See
limited partnership requested to be so deleted or added "Description of OP Units -- Amendment of the AIMCO
by any federal or state regulatory agency, which is Operating Partnership Agreement" in the accompanying
deemed by such agency to be for the benefit of the Prospectus.
limited partners. No amendment may be made without the
consent of the affected limited partner if such
amendment: (1) converts the limited partner into a
general partner, (2) eliminates or decreases the
limited liability of the limited partner, (3) alters
the interest of a partner in the
</TABLE>
S-62
<PAGE> 1639
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
allocations or distributions from your partnership or
(4) affects the status of your partnership as a
partnership for Federal income tax purposes. Other
amendments to your partnership's agreement of limited
partnership must be approved by limited partnership
holding a majority of the then outstanding units.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
Your general partner received 10% of the Cash Available The general partner does not receive compensation for
for Distribution (as defined in your partnership's its services as general partner of the AIMCO Operating
agreement of limited partnership) as compensation for Partnership. However, the general partner is entitled
its services as general partner and may receive to payments, allocations and distributions in its
reimbursement for expenses incurred in such capacity. capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except for fraud, willful misconduct or gross
partnership, a limited partner is not liable for any negligence, no OP Unitholder has personal liability for
debts, liabilities, contracts or obligations of your the AIMCO Operating Partnership's debts and
partnership. A limited partner is liable only to make obligations, and liability of the OP Unitholders for
payments of his capital contribution when due under the AIMCO Operating Partnership's debts and obligations
your partnership's agreement of limited partnership. is generally limited to the amount of their invest-
After its capital contribution is fully paid, no ment in the AIMCO Operating Partnership. However, the
limited partner will, except as otherwise required by limitations on the liability of limited partners for
applicable law, be required to make any further capital the obligations of a limited partnership have not been
contributions or lend any funds to your partnership. clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, your general partner has a fiduciary duty partnership agreement, Delaware law generally requires
to safeguard the funds of the partnership and a general partner of a Delaware limited partnership to
partnership funds may not be commingled with the funds adhere to fiduciary duty standards under which it owes
of any other person except as provided in the partner- its limited partners the highest duties of good faith,
ship agreement. Your general partner has a fiduciary fairness and loyalty and which generally prohibit such
responsibility for the safekeeping and use of all funds general partner from taking any action or engaging in
and assets of the partnership, whether or not in the any transaction as to which it has a conflict of
immediate possession or control of the general partner, interest. The AIMCO Operating Partnership Agreement
and the general partner may not employ, or permit expressly authorizes the general partner to enter into,
another to employ, such funds or assets in any manner on behalf of the AIMCO Operating Partnership, a right
except for the exclusive benefit of the partnership. of first opportunity arrangement and other conflict
Your general partner may engage in or possess an avoidance agreements with various affiliates of the
interest in any other business or venture of every AIMCO Operating Partnership and the general partner, on
nature and description, independently or with others, such terms as the general partner, in its sole and
including the ownership, financing, leasing, operation, absolute discretion, believes are advisable. The AIMCO
management, brokerage and development of real property. Operating Partnership Agreement expressly limits the
liability of the general partner by providing that the
general partner, and its officers and directors will
not be liable or accountable in damages to the AIMCO
</TABLE>
S-63
<PAGE> 1640
<TABLE>
<CAPTION>
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<S> <C>
Operating Partnership, the limited partners or
assignees for errors in judgment or mistakes of fact or
law or of any act or omission if the general partner or
such director or officer acted in good faith. See
"Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
<TABLE>
<CAPTION>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after AIMCO Oper-
</TABLE>
S-64
<PAGE> 1641
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
the fifth anniversary of the issue ating Partnership sells or
date of the Preferred OP Units. refinances its assets, the net
proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; extend the term of Prospectus. So long as any institution of bankruptcy
your partnership; remove or elect a Preferred OP Units are outstand- proceedings, an assignment for the
general partner; and approve or ing, in addition to any other vote benefit of creditors and certain
disapprove the sale of all or or consent of partners required by transfers by the general partner of
substantially all of the assets of law or by the AIMCO Operating its interest in the AIMCO Operating
your partnership. Partnership Agreement, the Partnership or the admission of a
affirmative vote or consent of successor general partner.
A general partner may cause the holders of at least 50% of the
dissolution of your partnership by outstanding Preferred OP Units will Under the AIMCO Operating Partner-
retiring. Your partnership may be be necessary for effecting any ship Agreement, the general partner
continued by the remaining general amendment of any of the provisions has the power to effect the
partner or, if none, the limited of the Partnership Unit Desig- acquisition, sale, transfer,
partners may agree to continue your nation of the Preferred OP Units exchange or other disposition of
partnership by electing a successor that materially and adversely any assets of the AIMCO Operating
general partner upon the vote of affects the rights or preferences Partnership (including, but not
the limited partners owning a of the holders of the Preferred OP limited to, the exercise or grant
majority of the units within 120 Units. The creation or issuance of of any conversion, option,
days after the retirement of the any class or series of partnership privilege or subscription right or
general partner. units, including, without any other right available in
limitation, any partnership units connection with any assets at any
that may have rights senior or time held by the AIMCO Operating
superior to the Preferred OP Units, Partnership) or the merger,
shall not be deemed to materially consolidation, reorganization or
adversely affect the rights or other combination of the AIMCO
preferences of the holders of Operating Partnership with or into
Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
scribed voting rights, each
Preferred OP Units shall have one The general partner may cause the
(1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
Partnership by an "event of
withdrawal," as defined in the
Delaware Limited Partnership Act
(including, without limitation,
bankruptcy), unless, within 90 days
after the withdrawal, holders of a
"majority in interest," as defined
in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
S-65
<PAGE> 1642
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations, sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
The distributions payable to the $ per Preferred OP Unit; tribute quarterly all, or such
partners are not fixed in amount provided, however, that at any time portion as the general partner may
and depend upon the operating and from time to time on or after in its sole and absolute discretion
results and net sales or the fifth anniversary of the issue determine, of Available Cash (as
refinancing proceeds available from date of the Preferred OP Units, the defined in the AIMCO Operating
the disposition of your AIMCO Operating Partnership may Partnership Agreement) generated by
partnership's assets. adjust the annual distribution rate the AIMCO Operating Partnership
on the Preferred OP Units to the during such quarter to the general
lower of (i) % plus the annual partner, the special limited
interest rate then applicable to partner and the holders of Common
U.S. Treasury notes with a maturity OP Units on the record date
of five years, and (ii) the annual established by the general partner
dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
S-66
<PAGE> 1643
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may assign one or There is no public market for the There is no public market for the
more whole units by a written Preferred OP Units and the OP Units. The AIMCO Operating Part-
instrument in accordance with your Preferred OP Units are not listed nership Agreement restricts the
partnership's agreement of limited on any securities exchange. The transferability of the OP Units.
partnership, unless such assignment Preferred OP Units are subject to Until the expiration of one year
or transfer would violate state restrictions on transfer as set from the date on which an OP
securities law or result in the forth in the AIMCO Operating Unitholder acquired OP Units,
termination of your partnership for Partnership Agreement. subject to certain exceptions, such
tax purposes. In order for an OP Unitholder may not transfer all
assignee to become a substituted Pursuant to the AIMCO Operating or any portion of its OP Units to
limited partner the following Partnership Agreement, until the any transferee without the consent
conditions must first be satisfied: expiration of one year from the of the general partner, which
(1) the filing with the partnership date on which a holder of Preferred consent may be withheld in its sole
of a written instrument of OP Units acquired Preferred OP and absolute discretion. After the
assignment covering no less than Units, subject to certain expiration of one year, such OP
five units; (2) the execution by exceptions, such holder of Unitholder has the right to
the assignor and assignee of any Preferred OP Units may not transfer transfer all or any portion of its
other documentation required or all or any portion of its Pre- OP Units to any person, subject to
requested by the general partner; ferred OP Units to any transferee the satisfaction of certain
(3) the written consent of the without the consent of the general conditions specified in the AIMCO
general partner is obtained; and partner, which consent may be Operating Partnership Agreement,
(4) a transfer fee covering all withheld in its sole and absolute including the general partner's
reasonable expenses connected with discretion. After the expiration of right of first refusal. See
such substitution is paid to the one year, such holders of Preferred "Description of OP Units --
partnership. OP Units has the right to transfer Transfers and Withdrawals" in the
all or any portion of its Preferred accompanying Prospectus.
OP Units to any person, subject to
the satisfaction of certain After the first anniversary of
conditions specified in the AIMCO becoming a holder of Common OP
Operating Partnership Agreement, Units, an OP Unitholder has the
including the general partner's right, subject to the terms and
right of first refusal. conditions of the AIMCO Operating
Partnership Agreement, to require
After a one-year holding period, a the AIMCO Operating Partnership to
holder may redeem Preferred OP redeem all or a portion of the
Units and receive in exchange Common OP Units held by such party
therefor, at the AIMCO Operating in exchange for a cash amount based
Partnership's option, (i) subject on the value of shares of Class A
to the terms of any Senior Units, Common Stock. See "Description of
cash in an amount equal to the OP Units -- Redemption Rights" in
Liquidation Preference of the the accompanying Prospectus. Upon
Preferred OP Units tendered for receipt of a notice of redemption,
redemption, (ii) a number of shares the AIMCO Operating Partnership
of Class I Cumulative Preferred may, in its sole and absolute
Stock of AIMCO that pay an discretion but subject to the
aggregate amount of dividends yield restrictions on the ownership of
equivalent to the distributions on Class A Common Stock imposed under
the Preferred OP Units tendered for AIMCO's charter and the transfer
redemption and are part of a class restrictions and other limitations
or series of preferred stock that thereof, elect to cause AIMCO to
is then listed on the New York acquire some or all of the tendered
Stock Exchange or another national Common OP Units in exchange for
securities exchange, or (iii) a Class A Common Stock, based on an
number of shares of Class A Common exchange ratio of one share of
Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 1645
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 1646
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 1647
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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<PAGE> 1648
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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<PAGE> 1649
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS
CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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<PAGE> 1652
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee equal to 10% of your
partnership's cash available for distribution for its services as general
partner and may receive reimbursement for expenses generated in such capacity.
The general partner received such fees and reimbursements totaling $182,000 in
1996, $239,000 in 1997 and $82,000 for the first six months of 1998. The
property manager received management fees of $1,010,000 in 1996, $1,044,000 in
1997 and $534,000 for the first six months of 1998. The AIMCO Operating
Partnership has no current intention of changing the fee structure for the
manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-76
<PAGE> 1653
YOUR PARTNERSHIP
GENERAL
Century Properties Growth Fund XXII was organized on January 31, 1984,
under the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following nine
residential apartment complexes: Wood Creek Apartments, a 432-unit complex in
Mesa, Arizona; Plantation Creek Apartments, a 484-unit complex in Atlanta,
Georgia; Stoney Creek Apartments, a 364-unit complex in Dallas, Texas; Four Wind
Apartments, a 350-unit complex in Overland, Kansas; Promontory Point Apartments,
a 252-unit complex in Austin, Texas; Cooper's Pointe Apartments, a 192-unit
complex in Charleston, South Carolina; Hampton Greens Apartments, a 309-unit
complex in Dallas, Texas; Autumn Run Apartments, a 320-unit complex in
Naperville, Illinois; and Copper Mill Apartments, a 192-unit complex in
Richmond, Virginia. The general partner of your partnership is Fox Partners IV,
which is a majority-owned subsidiary of AIMCO. The executive officers and
directors of the general partner are the same as those of the AIMCO GP, which
are set forth in Appendix B hereto. NPI-AP Management L.P., which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
your partnership. As of December 31, 1997, there were 82,848 units issued and
outstanding, which were held of record by 5,471 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757- 8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated September 25, 1984, by which units in
your partnership were originally offered, the general partner of your
partnership (which at the time was not affiliated with AIMCO) indicated that it
would sell your partnership's properties five to eight years after their
acquisition. Under your partnership's agreement of limited partnership, the term
of the partnership will continue until December 31, 2010, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
S-77
<PAGE> 1654
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner is not liable to the
partnership for any loss suffered by the partnership which arises out of any
action or inaction of the general partner, if the general partner, in good
faith, determined that such action or inaction was in the best interests of the
partnership and did not constitute negligence or misconduct of the general
partner. As a result, unitholders might have a more limited right of action in
certain circumstances than they would have in the absence of such a provision in
your partnership's agreement of limited partnership. The general partner of your
partnership is majority-owned by AIMCO. See "Conflicts of Interest".
Your general partner and any of its affiliates are entitled to
indemnification for any liability, loss or damage incurred by them or by the
partnership by reason of any act performed or omitted to be performed by them in
connection with the business of the partnership, including costs and attorney's
fees and any amounts expended in the settlements of any claims of liability
provided that if such liability arises out of any action or inaction of the
general partner such conduct did not constitute fraud, negligence or misconduct
by the general partner. All judgments against the partnership and the general
partner, wherein the general partner is entitled to indemnification, must first
be satisfied from partnership assets before the general partner is responsible
for these obligations. Notwithstanding the above paragraph, neither the general
partner, nor any affiliate of the general partner or the partnership, will be
indemnified from any liability incurred by them in connection with (1) any claim
or settlement involving allegations that the securities laws were violated by
the general partner or by any such other person unless: (a) the general partner
or other persons or entities seeking indemnification are successful in defending
such action, and (b) such indemnification is specifically approved by a court of
law which is advised as to the current position of any relevant regulatory
agencies regarding indemnification for securities law violations; or (2) any
liability imposed by law, including liability for fraud, bad faith or
negligence.
Your partnership's agreement of limited partnership does not limit the
amount or type of insurance your partnership may purchase to cover the liability
of the general partner of your partnership.
S-78
<PAGE> 1655
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $1,000.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 0.00
January 1, 1996 - December 31, 1996......................... 30.76
January 1, 1997 - December 31, 1997......................... 0.00
January 1, 1998 - June 30, 1998............................. 0.00
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 29.58% interest in your partnership, including 22,845.5 units held by us and
the interest held by Fox Partners IV, as general partner of your partnership.
Except as set forth above, neither the AIMCO Operating Partnership, nor, to the
best of its knowledge, any of its affiliates, (i) beneficially own or have a
right to acquire any units, (ii) have effected any transactions in the units in
the past 60 days, or (iii) have any contract, arrangement, understanding or
relationship with any other person with respect to any securities of your
partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning transfer or voting thereof, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $178,000
1995........................................................ 174,000
1996........................................................ 182,000
1997........................................................ 239,000
1998 (through June 30)...................................... 82,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $ 825,000
1995........................................................ 1,011,000
1996........................................................ 1,010,000
1997........................................................ 1,044,000
1998 (through June 30)...................................... 534,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-79
<PAGE> 1656
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-80
<PAGE> 1657
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Century Properties Growth Fund
XXII appearing in Century Properties Growth Fund XXII Annual Report (Form
10-KSB) for the year ended December 31, 1997, have been audited by Imowitz
Koenig & Co., LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such financial statements
are incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
S-81
<PAGE> 1658
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: Century Properties Growth Fund XXII
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
Century Properties Growth Fund XXII (the "Partnership") (the Purchaser, AIMCO,
the General Partner and other affiliates and subsidiaries of AIMCO are referred
to herein collectively as the "Company"), is contemplating a transaction (the
"Offer") in which a minority of the outstanding limited partnership interests in
the Partnership (the "Units") will be acquired by the Purchaser in exchange for
an offer price per Unit of $ in cash, or Common OP Units of the
Purchaser, or Preferred OP Units of the Purchaser, or a combination of
any of such forms of consideration. The limited partners of the Partnership (the
"Limited Partners") will have the choice to maintain their current interest in
the Partnership or exchange their Units for any or a combination of such forms
of consideration. The amount of cash, Common OP Units or Preferred OP Units
offered per Unit is referred to herein as the "Offer Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 1659
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1660
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 1661
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1662
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1663
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1664
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1665
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1666
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1667
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF
OFFER AND TO RENDER AN OPINION AS TO THE YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $82.00 per unit
and an affiliate estimated the net liquidation value of your units to be
$82.94 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a debt obligation owed by, and secured by
properties held by, Consolidated Capital Equity Properties/Two (the
"Loan") to holding an interest in our large portfolio of properties. In
the future, the Loan owned by your partnership may outperform our
portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1668
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-15
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Consolidated
Capital Institutional Properties/2......... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-64
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
</TABLE>
i
<PAGE> 1669
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-78
Property Management.......................... S-78
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-79
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-82
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1670
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Consolidated Capital Institutional Properties/2. For each unit that you
tender, you may choose to receive of our Tax-Deferral %
Partnership Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred
to as "Common OP Units"), or $ in cash (subject, in each case to
adjustment for any distributions paid to you during the offer period). If
you like, you can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in ConCap Equities, Inc., the
managing general partner of your partnership (the "general partner"), and
the company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1671
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1672
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $1.65 per unit for the six months
ended June 30, 1998 (equivalent to $ on an annual basis). We will pay
fixed quarterly distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of
Tax-Deferral Common OP Units. We pay quarterly distributions on the
Tax-Deferral Common OP Units based on our funds from operations for that
quarter. For the six months ended June 30, 1998, we paid distributions of
$1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25 on
an annual basis). This is equivalent to distributions of $ per year
on the number of Tax-Deferral % Preferred OP Units, or $ per year on
the number of Tax-Deferral Common OP Units, that you would receive in an
exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in the Loan to holding an interest in
an operating business that owns and manages a large portfolio of
properties, with risks that do not exist for your partnership. You should
review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
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<PAGE> 1673
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $5.12 per unit to $100.00 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, your
general partner estimated the net asset value of your units to be $82.00
per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $82.94 per unit. However, we do not
believe that these valuations represent the current fair market value of
your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the Loan, your partnership's sole property, by
estimating the value of the property owned by Consolidated Capital Equity
Properties/Two ("CCEP/2") using the direct capitalization method. This
method involves applying a capitalization rate to your partnership's annual
net operating income. We determined an appropriate capitalization rate
using our best judgment, but our valuation is just an estimate. Although
the direct capitalization method is a widely-accepted way of valuing real
estate, there are a number of other methods available to value real estate,
each of which may result in different valuations of the property. The
proceeds that you would receive if you sold your units to someone else or
if your partnership were actually liquidated might be higher or lower than
our offer consideration. An actual liquidation may also result in your
paying taxes.
S-4
<PAGE> 1674
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires you to tender a minimum of 20
units (except for IRAs and Keogh Plans).
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 1675
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 1676
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the exchange ratios and the cash
consideration, without any arms-length negotiations. We have retained Robert A.
S-7
<PAGE> 1677
Stanger & Co., Inc. to conduct an analysis of our offer and to render an opinion
as to the fairness to you of our offer consideration, from a financial point of
view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's Loan may outperform our larger, more diversified portfolio of
assets. Although we cannot predict the future value of your partnership's Loan,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, you might
receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be $82
per unit and an affiliate of your general partner estimated the net liquidation
value of your units to be $82.94 per unit. However, we do not believe that these
valuations represent the current fair market value of your units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $5.12 per unit to $100 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
S-8
<PAGE> 1678
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns the Loan to an interest
in a partnership that invests in and manages a large portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the
S-9
<PAGE> 1679
holders of OP Units. Such securities could have priority over the OP Units as to
cash flow, distributions and liquidation proceeds. The effect of any such
issuance may be to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our
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investors unless certain financial tests or other criteria are satisfied. In
some cases, our subsidiaries are subject to similar provisions, which may
restrict their ability to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
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POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
21.2% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your partnership
to sell its assets, distribute the net liquidation proceeds to its partners
in accordance with your partnership's agreement of limited partnership, and
then dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes,
at their option. If your partnership were to sell its assets and liquidate,
you and your partners would not need to rely upon capitalization of income
or other valuation methods to estimate the fair market value of your
partnership's assets. Instead, such assets would be valued through
negotiations with prospective purchasers. However, a liquidating sale of
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
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Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have
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the opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
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Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
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THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. The Loan held by your
partnership is not typical of the kinds of loans traded in the secondary markets
since it is non-recourse; therefore, we believe the conventional loan valuation
analysis is probably not a realistic approach to valuation. We believe a
purchaser of the Loan more likely would view the Loan as approximately
equivalent to the value of the properties less third party mortgages, of CCEP/2,
which secure the principal amount of the Loan, because the outstanding principal
amount of the Loan, approximately $240,084,000 as of March 31, 1998 (including
interest accrued and added to principal pursuant to the terms of the Loan)
exceeds our estimate of the gross property value of the properties, less
accumulated depreciation, of CCEP/2 ($38,577,000 as of June 30, 1998). We
estimated the value of each property owned by CCEP/2 using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a
widely-accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
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In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $5.12 to $100
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives no fee
for its services but may receive reimbursement for expenses incurred in its
capacity as general partner of your partnership. The general partner of your
partnership received total fees and reimbursement of $149,000 during the first
six months of 1998.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Consolidated Capital Institutional Properties/2 was organized on April 12,
1983, under the laws of the State of California.
Your partnership was formed for the purpose of making loans to a
predecessor partnership of CCEP/2. CCEP/2's indebtedness in respect of the loans
made to it and its predecessor partnership by your partnership now is
represented by the Loan. The Loan is secured by deeds of trust or mortgages on
the CCEP/2 properties. The non-recourse provisions of the Loan mean that
CCEP/2's obligation to repay the Loan is
S-18
<PAGE> 1688
secured only by the value of the properties of CCEP/2, and your partnership has
no right to make further claims against CCEP/2 other than to the extent of the
value of those properties. The loan agreement provides that interest on the
outstanding principal balance accrues at a fixed rate (10% per year), although
such interest is payable only to the extent CCEP/2 has "excess cash flow"
(generally defined as net cash flow from operations after third-party debt
service and capital improvements). Accrued unpaid interest is added to
principal. At March 31, 1998, the aggregate outstanding principal balance of the
Loan (including interest accrued and added to principal pursuant to the terms of
the Loan) was approximately $240,084,000. This amount is substantially greater
than the estimated fair market value of the CCEP/2 properties (which are the
only source of repayment for the Loan). Under the terms of the Loan, any net
proceeds from sales or refinancings of the CCEP/2 properties are paid to the
partnership, after payment of a 3% disposition fee to the general partner of
CCEP/2. The amount of cash flow received by your partnership pursuant to the
terms of the Loan depends heavily on the discretion exercised by the general
partner of CCEP/2 with respect to sales, refinancing of, or obtaining financing
on, any CCEP/2 property.
CCEP/2's investment portfolio currently consists of six office buildings
and four residential apartment complexes, all of which serve as collateral for
the Loan. The deeds of trust in favor of your partnership that encumber the
CCEP/2 properties are subordinated to the mortgage liens in favor of
unaffiliated third parties that secure an aggregate indebtedness of $32,764,720
(as of June 30, 1998). Those properties are as follows: a 115,829 square-foot
commercial complex in Southfield, Michigan; a 101,823 square-foot commercial
complex in Southfield, Michigan; a 64,762 square-foot commercial complex in
Southfield, Michigan; a 173,991 square-foot commercial complex in Southfield,
Michigan; a 262,457 square-foot commercial complex in Richmond, Virginia; a
159,416 square-foot commercial complex in Santa Ana, California; a 90-unit
residential apartment complex in Littleton, Colorado; a 176-unit residential
apartment complex in Woodbridge, Illinois; a 330-unit residential apartment
complex in Cincinnati, Ohio; and a 257-unit residential apartment complex in
Houston, Texas.
Your partnership's sole investment property was sold in September 1996,
and, therefore, your partnership has no real estate assets.
The general partner of your partnership is ConCap Equities, Inc., which is
a majority-owned subsidiary of AIMCO. ConCap Holdings, Inc., which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
CCEP/2. ConCap Holdings, Inc., an affiliate of your general partner and the sole
general partner of CCEP/2, has full discretion in conducting CCEP/2's business.
As of September 15, 1998, there were 909,133.8 units of limited partnership
interest issued and outstanding, which were held of record by 34,705 limited
partners. Your partnership's principal executive offices are located at 1873
South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone
number at that address is (303) 757-8101. For additional information about your
partnership, please refer to the annual and quarterly reports prepared by your
partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1689
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995 and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1690
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
- ---------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1691
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1692
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1693
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1694
SUMMARY FINANCIAL INFORMATION OF CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
The summary financial information of Consolidated Capital Institutional
Properties/2 for the six months ended June 30, 1998 and 1997 is unaudited. The
summary financial information for Consolidated Capital Institutional
Properties/2 for the years ended December 31, 1997, 1996 and 1995 is based on
audited financial statements. This information should be read in conjunction
with such financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
incorporated by reference herein.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $28,966 $ 920 $ 6,755 $ 2,070 $ 4,065
Net Income (Loss)........................................... 28,622 654 5,275 (579) (2,616)
Net Income (Loss) per limited partnership unit.............. 31.17 0.71 6.83 (0.63) (2.85)
Distributions per limited partnership unit.................. 1.65 10.98 10.98 -- 3.27
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $ -- $ -- $ -- $ -- 2,018
Total Assets................................................ 78,074 45,316 50,906 54,636 55,494
Notes Payable............................................... -- -- -- -- --
Partners' Capital (Deficit)................................. 77,872 45,128 50,749 54,466 55,045
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
CONSOLIDATED CAPITAL
AIMCO OPERATING INSTITUTIONAL
PARTNERSHIP PROPERTIES/2
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding.................... $1.125 $1.85 $1.65 $10.98
</TABLE>
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<PAGE> 1695
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $5.12 per unit to
$100.00 per unit from January 1, 1997 to September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$82.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. The Loan may
outperform our larger, more diversified portfolio of assets. Although we cannot
predict the future value of the Loan, our offer consideration could be less than
the net proceeds that you would realize upon a future liquidation of your
partnership. Accordingly, although there can be no assurance, you might receive
more consideration if you do not tender your units and, instead, continue to
hold your units and ultimately receive proceeds from a liquidation of your
partnership. However, you may prefer to receive our offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net liquidation value of your units to
be $82.94 per unit. However, we do not believe that this valuation represents
the current fair market value of your units. Furthermore, your general partner
has no present intention to liquidate your partnership, and your partnership's
agreement of limited partnership does not require a sale of the Loan by any
particular date.
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
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<PAGE> 1696
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. The sole property your partnership owns is the Loan. In contrast,
the AIMCO Operating Partnership is in the business of acquiring, marketing,
managing and operating a large portfolio of apartment properties. While
diversification of assets may reduce
S-27
<PAGE> 1697
certain risks of investment attributable to a single property or entity,
there can be no assurance as to the value or performance of our securities or
our portfolio of properties as compared to the value of your units or your
partnership. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the six months ended June 30, 1998
were $1.65 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as
S-28
<PAGE> 1698
receiving a hypothetical distribution of cash resulting from a decrease in
your share of the liabilities of your partnership. Any such hypothetical
distribution of cash would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a majority owned subsidiary of AIMCO. Through the Insignia
Merger, AIMCO also acquired a majority ownership interest in ConCap Holdings,
Inc., which manages the properties owned by Consolidated Capital Equity
Properties/Two, which owns the properties securing the Loan. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 21.4%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
S-29
<PAGE> 1699
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In December 1997, Reedy River Properties,
L.L.C., then an affiliate of Insignia and now our affiliate, commenced a tender
offer pursuant to which it acquired 169.105.3 units (representing approximately
18.6% of the number outstanding) at a cash purchase price of $40 per unit in
December 15, 1997.
Cooper River Properties, LLC., then an affiliate of Insignia and now our
affiliate, completed a tender offer for $50 per unit and purchased
shares in , 1998.
Madison Partnership Liquidity Investors 64, LLC, which is unaffiliated with
Insignia and with AIMCO, completed a tender offer for $40 per unit and purchased
shares in , 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the
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<PAGE> 1700
partnership's property in a private transaction at some point in the future a
more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the
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<PAGE> 1701
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 1702
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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<PAGE> 1703
, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of 20 units (except units held by IRAs and Keogh Plans. No
alternative, conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
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THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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<PAGE> 1707
pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 201,904.5 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 22.2% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint has been filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. The Loan held by your
partnership is not typical of the kinds of loans traded in the secondary markets
since it is non-recourse; therefore, we believe the conventional loan valuation
analysis is probably not a realistic approach to valuation. We believe a
purchaser of the Loan more likely would view the Loan as approximately
equivalent to the value, less third party mortgages of the properties, of
CCEP/2, which secure principal amount of the Loan, because the outstanding
principal amount of the Loan, approximately $240,084,000 as of March 31, 1998
(including interest accrued and added to principal pursuant to the terms of the
Loan exceeds our estimate of the gross property value of the properties, less
accumulated depreciation, of CCEP/2 ($38,577,000 as of June 30, 1998). For this
purpose, we estimated the value of each property owned by CCEP/2 using the
direct capitalization method. This method involves applying a capitalization
rate to the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by CCEP/2 using the
direct capitalization method. We selected capitalization rates based on
our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We
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multiplied each property's 1997 net operating income by its capitalization
rate to derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Canyon Crest Apartments.................. $ % $
Highcrest Townhomes Apartments...........
Village Brook Apartments.................
Windmere Apartments......................
Central Park Place.......................
Central Park Plaza.......................
Crescent Center..........................
Lahser Center I and II...................
Richmond Plaza...........................
Town Center Place........................
</TABLE>
- Second, we calculated the value of the equity of CCEP/2 by adding to the
aggregate gross property value of all properties owned by your
partnership, and deducting the mortgage debt owed by CCEP/2 after
consideration of any applicable subordination provisions affecting
payment of such debt. We deducted from this value any taxes and certain
other costs including required capital expenditures and deferred
maintenance to derive a net equity value for your partnership of
$ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
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<PAGE> 1719
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would
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<PAGE> 1720
receive in exchange for each of your partnership's units. Distributions
with respect to your units for the six months ended June 30, 1998 were
$1.65 (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
partner of your partnership and the AIMCO Operating Partnership believe that the
valuation method described in "Valuation of Units" provides a meaningful
indication of value for residential apartment properties although there are
other ways to value real estate. A liquidation in the future might generate a
higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions
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<PAGE> 1721
analyzed by it in arriving at the estimates of value would exist at the
time of the offer. The assumptions used have been determined by the general
partner of your partnership in good faith, and, where appropriate, are based
upon current and historical information regarding your partnership and current
real estate markets, and have been highlighted below to the extent critical to
the conclusions of the general partner of your partnership. The estimated values
in the following chart are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Actual results may vary
from those set forth below based on numerous factors, including interest rate
fluctuations, tax law changes, supply and demand for similar apartment
properties, the manner in which your partnership's property is sold and changes
in availability of capital to finance acquisitions of apartment properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $5.12 to $100.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
June 30, 1998 an aggregate of 35,696 units (representing less than 4% of the
total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to September 30, 1998, as reported by the
general partner and by The Partnership Spectrum, which is an independent,
third-party source. The gross sales prices reported by The Partnership Spectrum
do not necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices; thus the AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete. The transfer paperwork submitted
to the general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
S-52
<PAGE> 1722
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter.................................... $13.50 $ 52.03 (c) (c)
Second Quarter................................... 10.00 81.68 $30.00 $43.00
First Quarter.................................... 12.50 44.20 37.00 44.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter................................... 1.00 100.00 11.00 37.00
Third Quarter.................................... 6.62 45.25 22.00 40.00
Second Quarter................................... 5.12 100.00 17.00 35.00
First Quarter.................................... 9.75 54.50 30.00 48.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter................................... 8.88 100.00 30.00 46.00
Third Quarter.................................... 11.62 110.00 23.00 45.00
Second Quarter................................... 0.13 92.00 -- --
First Quarter.................................... 0.25 105.00 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve
S-53
<PAGE> 1723
additional selling expenses of % of the sale proceeds. The general
partner of your partnership believes this is a normal and customary cost of
property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Certain of CCEP/2's properties have been appraised in the past
several years by independent, third party appraisers (either Koeppel Tener Real
Estate Services, Inc. ("KTR") or Joseph J. Blake & Associates, Inc. ("Blake"))
in connection with the initial financings obtained on those properties.
According to the appraisal reports, the scope of the appraisals included in an
inspection of each property and an analysis of the respective surrounding
markets. In each case, the applicable independent appraiser relied principally
on the income capitalization approach to valuation and secondarily on the sales
comparison approach, and represented that its report was prepared in accordance
with the Code of Professional Ethics and Standards of Professional Appraisal
Practice of the Appraisal Institute and the Uniform Standards of Professional
Appraisal Practice, and in compliance with the Appraisal Standards set forth in
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (known
as "FIRREA"). The estimated market values of the fee simple estate of each of
the CCEP/2 properties specified in the most recent appraisal reports for the
CCEP/2 properties that have been appraised within the past three years are set
forth in the table below, and copies of the summaries of those appraisals have
been filed as exhibits to AIMCO Operating Partner's Tender Offer Statement on
Schedule 14D-1 filed with the SEC.
<TABLE>
<CAPTION>
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL APPRAISER
- ------------- ---------- --------- ---------
<S> <C> <C> <C>
Canyon Crest................................................ $3,800,000 4/23/96 Blake
Highcrest Townhomes......................................... $8,250,000 4/12/96 KTR
Windemere................................................... $6,250,000 4/30/96 KTR
</TABLE>
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by a party unaffiliated party in July 1998. Your general partner's
estimate of your partnership's net asset value per unit as of June 30, 1998 was
$82 per unit. Your general partner estimates net asset value based on a
hypothetical sale of all of the CCEP/2 properties and the distribution to the
limited partners and the general partner of the proceeds of such sales, net of
related indebtedness and transaction costs, together with your partnership's
cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of your
partnership's other known liabilities. The net asset value estimate prepared by
the general partner does not take into account (i) timing considerations or (ii)
costs associated with winding up the partnership. Therefore, we believe that the
general partner's estimate of net asset value per unit does not necessarily
represent either the fair market value of a unit or the amount a limited partner
reasonably could expect to receive if the CCEP/2 properties were sold and your
partnership was liquidated. For this reason, we considered your general
partner's net asset value estimate to be less meaningful in determining the
offer consideration than the analysis described above under "Valuation of
Units."
S-54
<PAGE> 1724
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-K filed with the SEC for the years
ending December 31, 1995, 1996 and 1997, and the quarterly report on Form 10-Q
for the period ending June 30, 1998, which reports your partnership's management
has indicated to be the most current available financial statements; (iii)
reviewed descriptive information concerning your partnership's properties
provided by management, including location,
S-55
<PAGE> 1725
number of units and unit mix or square footage, age, and amenities; (iv)
reviewed summary historical operating statements for your partnership's
properties for 1996 and 1997 and through June 30, 1998; (v) reviewed operating
budgets for your partnership's properties for 1998, as prepared by your
partnership; (vi) reviewed information prepared by management relating to any
debt encumbering your partnership's properties; (vii) reviewed information
regarding market rental rates and conditions for similar properties in the
general market area of your partnership's properties and other information
relating to acquisition criteria for similar properties; (viii) reviewed
internal financial analyses and forecasts prepared by your partnership of the
estimated current net liquidation value of your partnership; (ix) reviewed
information provided by AIMCO concerning the AIMCO Operating Partnership, the
Common OP Units and the Preferred OP Units; (x) reviewed available trading
information for the units; and (xi) conducted other studies, analysis and
inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your
S-56
<PAGE> 1726
partnership of expenses associated with such a liquidation. The liquidation
analysis assumed that your partnership's properties were sold to an independent
third-party buyer at the current property value estimated by the management of
your partnership and that normal and customary costs of property sale were
incurred, that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated between the general and limited partners in
accordance with your partnership agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
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<PAGE> 1727
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-58
<PAGE> 1728
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Distributable Cash from Operations (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2013. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to lend funds in The purpose of the AIMCO Operating Partnership is to
return for participating notes secured by deeds of conduct any business that may be lawfully conducted by
trust on real properties as may from time to time be a limited partnership organized pursuant to the
acquired by those specified in your partnership's Delaware Revised Uniform Limited Partnership Act (as
agreement of limited partnership. Subject to restric- amended from time to time, or any successor to such
tions contained in your partnership's agreement of statute) (the "Delaware Limited Partnership Act"),
limited partnership including that your partnership may provided that such business is to be conducted in a
not purchase real property, directly or indirectly, manner that permits AIMCO to be qualified as a REIT,
your partnership may perform all acts necessary, unless AIMCO ceases to qualify as a REIT. The AIMCO
advisable or convenient to the business of your Operating Partnership is authorized to perform any and
partnership. all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
S-59
<PAGE> 1729
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 1,600,020 units for time to the limited partners and to other persons, and
cash to selected persons who fulfill the requirements to admit such other persons as additional limited
set forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. The general partner may No action or consent by the OP Unitholders is required
not acquire properties in exchange for units. in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, the general partner and its affiliates may funds or other assets to its subsidiaries or other
acquire units from time to time on their own behalf and persons in which it has an equity investment, and such
for their own benefit, provided that such right does persons may borrow funds from the AIMCO Operating
not create any preferences in rights or benefits in Partnership, on terms and conditions established in the
favor of such persons or permit them to buy units other sole and absolute discretion of the general partner. To
than at the same cash price and on the same terms as the extent consistent with the business purpose of the
are available to other non-affiliated limited partners. AIMCO Operating Partnership and the permitted
Your partnership may not make any loans to the general activities of the general partner, the AIMCO Operating
partner but the general partner may lend money to your Partnership may transfer assets to joint ventures,
partnership on terms, as to interest rates and other limited liability companies, partnerships,
finance charges and fees, not in excess of amount that corporations, business trusts or other business
are charged by unrelated banks on comparable loans for entities in which it is or thereby becomes a
the same purpose, and, if a property is involved, in participant upon such terms and subject to such
the locality of the property. No prepayment charge or conditions consistent with the AIMCO Operating Part-
penalty will be required by the general partner on a nership Agreement and applicable law as the general
loan to your partnership. To the extent the general partner, in its sole and absolute discretion, believes
partner lends proceeds to your partnership, on an to be advisable. Except as expressly permitted by the
unsecured basis, such amounts will bear interest at an AIMCO Operating Partnership Agreement, neither the
amount not to exceed the lesser of the actual cost to general partner nor any of its affiliates may sell,
the general partner or the most recent prime rate of transfer or convey any property to the AIMCO Operating
interest charged by Bank of America, N.A., San Partnership, directly or indirectly, except pursuant to
Francisco main office, in effect on the date such loan transactions that are determined by the general partner
if first created. The general partner may not cause in good faith to be fair and reasonable.
your partnership to enter into any agreements with the
general partner or its affiliates which are not be
subject to termination without penalty by either party
upon not more than sixty days' written notice.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to obligate and bind your partnership and to take such restrictions on borrowings, and the general partner has
action as the general partner deems necessary or full power and authority to borrow money on behalf of
advisable, including, without limitation, making, the AIMCO Operating Partnership. The AIMCO Operating
executing and delivering loan agreements, mortgages, Partnership has credit agreements that restrict, among
security agreements, promissory notes, documents other things, its ability to incur indebtedness. See
related to mortgage-backed securities, and other "Risk Factors -- Risks of Significant Indebtedness" in
documents as provided for in your partnership's the accompanying Prospectus.
agreement of limited partnership. Your partnership may
not incur any non-recourse indebtedness wherein the
lender will have or acquire, at any time, capital or
property of your partnership except as a secured
creditor.
</TABLE>
S-60
<PAGE> 1730
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner, upon reasonable request, to with a statement of the purpose of such demand and at
inspect and copy during normal business hours the such OP Unitholder's own expense, to obtain a current
register kept by your partnership which lists the list of the name and last known business, residence or
names, addresses and business telephone numbers of all mailing address of the general partner and each other
limited partners and the number of units owned by each OP Unitholder.
limited partner. Upon request of a limited partner, the
general partner will promptly mail to such limited
partner a copy of the investor list. If the general
partner neglects or refuses to mail a copy of the
investor list as requested, the general partner may be
liable to the limited requesting the list for the cost
incurred by the limited partner in compelling the
production of the list and for actual damages incurred
by the limited partner.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership. Subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership, the right to vote on certain matters described under
the general partner, on behalf of your partnership, may "Comparison of Ownership of Your Units and AIMCO OP
take any action it deems necessary or advisable in Units -- Voting Rights" below. The general partner may
connection with the business of your partnership not be removed by the OP Unitholders with or without
without the consent of the limited partners. No limited cause.
partner has any authority or right to act for or bind
your partnership or participate in or have any control In addition to the powers granted a general partner of
over your partnership business except as required by a limited partnership under applicable law or that are
law. granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, except in the case of negligence or the AIMCO Operating Partnership Agreement, the general
misconduct, the general partner and its affiliate or partner is not liable to the AIMCO Operating
agents acting on their behalf are not liable, responsi- Partnership for losses sustained, liabilities incurred
ble or accountable in damages or otherwise to your or benefits not derived as a result of errors in
partnership (in any action, including a partnership judgment or mistakes of fact or law of any act or
derivative suit) or to any of the limited partners for omission if the general partner acted in good faith.
the doing of any act or the failure to do any act, the The AIMCO Operating Partnership Agreement provides for
effect of which may cause or result in loss or damage indemnification of AIMCO, or any director or officer of
to your partnership, if done in good faith to promote AIMCO (in its capacity as the previous general partner
the best interests of your partnership. The general of the AIMCO Operating Partnership), the general
partner and its affiliates or agents are entitled to partner, any officer or director of general partner or
indemnification by your partnership from assets of your the AIMCO Operating Partnership and such other persons
partnership, or as an expense of your partnership, but as the general partner may designate from and against
not from the limited partners, against any liability or all losses, claims, damages, liabilities, joint or
loss, as a result of any claim or legal proceeding several, expenses (including legal
(whether or not the same
</TABLE>
S-61
<PAGE> 1731
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
proceeds to judgment or is settled or otherwise brought fees), fines, settlements and other amounts incurred in
to a conclusion) relating to the performance or connection with any actions relating to the operations
non-performance of any act concerning the activities of of the AIMCO Operating Partnership, as set forth in the
your partnership except in the case where the general AIMCO Operating Partnership Agreement. The Delaware
partner or its affiliates or agents are guilty of bad Limited Partnership Act provides that subject to the
faith, negligence, misconduct or reckless disregard of standards and restrictions, if any, set forth in its
duty, provided such act or omission was done in good partnership agreement, a limited partnership may, and
faith to promote the best interests of your shall have the power to, indemnify and hold harmless
partnership. The indemnification authorized by your any partner or other person from and against any and
partnership's agreement of limited partnership includes all claims and demands whatsoever. It is the position
the payment of reasonable attorneys' fees and other of the Securities and Exchange Commission that
expenses (not limited to taxable costs) incurred in indemnification of directors and officers for
settling or defending any claims, threatened action or liabilities arising under the Securities Act is against
finally adjudicated legal proceedings. Notwithstanding public policy and is unenforceable pursuant to Section
the foregoing, neither the general partner nor any 14 of the Securities Act of 1933.
officer, director, employee, agent, subsidiary or
assign of the general partner or its affiliates are
indemnified from any liability, loss or damage incurred
by them in connection with (1) any claim or settlement
involving allegations that the Securities Act of 1933
was violated by the general partner or by any such
other person or entity unless: (i) the general partner
or other persons or entities seeking indemnification
are successful in defending such action and (ii) such
indemnification is specifically approved by a court of
law which is advised as to the current position of both
the Securities and Exchange Commission and the
California Commissioner of Corporations regarding
indemnification for violations of securities laws; or
(2) any liability imposed by law, including liability
for fraud, bad faith or negligence.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners holding a majority of has exclusive management power over the business and
the outstanding units may only remove a general partner affairs of the AIMCO Operating Partnership. The general
with the general partner's prior written consent. The partner may not be removed as general partner of the
holders of a majority of the outstanding units may AIMCO Operating Partnership by the OP Unitholders with
elect a successor general partner. No limited partner or without cause. Under the AIMCO Operating Partnership
may substitute a transferee of his units in such Agreement, the general partner may, in its sole
limited partner's place without the consent of the discretion, prevent a transferee of an OP Unit from
general partner which may be withheld at the sole becoming a substituted limited partner pursuant to the
discretion of the general partner. AIMCO Operating Partnership Agreement. The general
partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners to add to the representations, the general partner may, without the consent of the OP
duties, or obligations of the general partner or its Unitholders, amend the AIMCO Operating Partnership
affiliates or to surrender any rights or powers granted Agreement, amendments to the AIMCO Operating
to the general partner or its affiliates for the Partnership Agreement require the consent of the
benefit of the limited partners, to comply with federal holders of a majority of the outstanding Common OP
and state securities laws and to cure any ambiguities. Units, excluding AIMCO and certain other limited
Other amendments to your partnership's agreement of exclusions (a "Majority in Interest"). Amendments to
limited partnership must be approved by the limited the AIMCO Operating Partnership Agreement may be
partners owning more than 50% of the units. However, proposed by the general partner or by holders of a
the limited partners may not amend your partnership's Majority in Interest. Following such proposal, the
agreement of limited partnership (1) to extend your general partner will submit any proposed amendment to
partnership term or (2) to alter the rights of the the OP Unitholders. The general partner will seek the
general partner to receive compensation, return of written consent of the OP Unitholders on the proposed
invested capital, allocations, and distributions, amendment or will call a meeting to vote thereon. See
without the consent of the general partner. Also, a "Description of OP Units -- Amendment of the AIMCO
unanimous vote of the limited partners is required to Operating Partnership
amend the provision in your
</TABLE>
S-62
<PAGE> 1732
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partnership's agreement of limited partnership dealing Agreement" in the accompanying Prospectus.
with substituted limited partners.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
Your general partner will receive no fee for its The general partner does not receive compensation for
services as general partner of your partnership but may its services as general partner of the AIMCO Operating
receive reimbursement for expenses incurred in such Partnership. However, the general partner is entitled
capacity. to payments, allocations and distributions in its
capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under California law, a limited partner is not bound by Except for fraud, willful misconduct or gross
the obligations of your partnership. A limited partner negligence, no OP Unitholder has personal liability for
is liable only to make payments of his capital the AIMCO Operating Partnership's debts and
contribution when due under your partnership's obligations, and liability of the OP Unitholders for
agreement of limited partnership. After its capital the AIMCO Operating Partnership's debts and obligations
contribution is fully paid, no limited partner will, is generally limited to the amount of their invest-
except as otherwise required by applicable law, be ment in the AIMCO Operating Partnership. However, the
required to make any further capital contributions or limitations on the liability of limited partners for
lend any funds to your partnership. the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner must diligently and partnership agreement, Delaware law generally requires
faithfully devote as much of its time, but is not a general partner of a Delaware limited partnership to
required to devote its full time, to the business of adhere to fiduciary duty standards under which it owes
your partnership and must at all times act in a its limited partners the highest duties of good faith,
fiduciary manner toward your partnership and the fairness and loyalty and which generally prohibit such
limited partners. The general partner at all times has general partner from taking any action or engaging in
a fiduciary responsibility for the safekeeping and use any transaction as to which it has a conflict of
of all partnership funds and assets. The general interest. The AIMCO Operating Partnership Agreement
partner may assign some of its general partner expressly authorizes the general partner to enter into,
functions to an affiliate; provided, however, that, on behalf of the AIMCO Operating Partnership, a right
notwithstanding any such assignment, the general of first opportunity arrangement and other conflict
partner will retain full responsibility to your avoidance agreements with various affiliates of the
partnership for the satisfactory performance of all AIMCO Operating Partnership and the general partner, on
partnership general partner duties. The general partner such terms as the general partner, in its sole and
may not commingle funds of your partnership with any absolute discretion, believes are advisable. The AIMCO
other person. Subject to its fiduciary duties, general Operating Partnership Agreement expressly limits the
partner and its affiliates may engage in whatever liability of the general partner by providing that the
activities they choose, whether the same are general partner, and its officers and directors will
competitive with your partnership or otherwise, without not be liable or accountable in damages to the AIMCO
having or incurring any obligation to offer any Operating Partnership, the limited partners or
interest in such activities to your partnership or any assignees for errors in judgment or mistakes of fact or
limited partner. law or of any act or omission if the general partner or
such director or officer acted in good faith.
</TABLE>
S-63
<PAGE> 1733
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
See "Description of OP Units -- Fiduciary
Responsibilities" in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and
</TABLE>
S-64
<PAGE> 1734
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
new investments rather than being
distributed to the OP Unitholders
(including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove or elect a Prospectus. So long as any institution of bankruptcy
general partner; and approve other Preferred OP Units are outstand- proceedings, an assignment for the
matters as otherwise provided in ing, in addition to any other vote benefit of creditors and certain
your partnership's agreement of or consent of partners required by transfers by the general partner of
limited partnership. Unless prior law or by the AIMCO Operating its interest in the AIMCO Operating
consent of the limited partners Partnership Agreement, the Partnership or the admission of a
holding a majority of the units of affirmative vote or consent of successor general partner.
your partnership is obtained, the holders of at least 50% of the
general partner is prohibited from outstanding Preferred OP Units will Under the AIMCO Operating Partner-
(1) selling substantially all of be necessary for effecting any ship Agreement, the general partner
your partnership's assets in a amendment of any of the provisions has the power to effect the
single sale or in multiple sales in of the Partnership Unit Desig- acquisition, sale, transfer,
the same 12-month period, except in nation of the Preferred OP Units exchange or other disposition of
the orderly liquidation and winding that materially and adversely any assets of the AIMCO Operating
up of the business, (2) pledging affects the rights or preferences Partnership (including, but not
the credit of your partnership in of the holders of the Preferred OP limited to, the exercise or grant
any way except in the ordinary Units. The creation or issuance of of any conversion, option,
course of business, (3) executing any class or series of partnership privilege or subscription right or
or delivering any assignment for units, including, without any other right available in
the benefit of the creditors of limitation, any partnership units connection with any assets at any
your partnership, and (4) that may have rights senior or time held by the AIMCO Operating
releasing, assigning or superior to the Preferred OP Units, Partnership) or the merger,
transferring a partnership claim, shall not be deemed to materially consolidation, reorganization or
security, commodity or any other adversely affect the rights or other combination of the AIMCO
asset in your partnership without preferences of the holders of Operating Partnership with or into
full and adequate consideration. Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
A general partner may cause the scribed voting rights, each
dissolution of your partnership by Preferred OP Units shall have one The general partner may cause the
retiring. Your partnership may be (1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
continued by the remaining general Partnership by an "event of
partner or, if none, the limited withdrawal," as defined in the
partners may agree to continue your Delaware Limited Partnership Act
partnership by electing a successor (including, without limitation,
general partner upon the vote of bankruptcy), unless, within 90 days
holders of more than 50% of the after the withdrawal, holders of a
units within 60 days after the "majority in interest," as defined
retirement of the general partner. in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash availa- declared the
</TABLE>
S-65
<PAGE> 1735
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
ble for distribution, whether by the board of directors of the AIMCO Operating Partnership Agree-
arising from operations or sales or general partner of the AIMCO ment requires the general partner
refinancing, is to be shared among Operating Partnership, quarterly to cause the AIMCO Operating
the partners. Distributions of cash distributions at the rate of Partnership to distribute quarterly
Distributable Cash From Operations $ per Preferred OP Unit; all, or such portion as the general
are to be made quarterly during the provided, however, that at any time partner may in its sole and abso-
fiscal year. The distributions and from time to time on or after lute discretion determine, of
payable to the partners are not the fifth anniversary of the issue Available Cash (as defined in the
fixed in amount and depend upon the date of the Preferred OP Units, the AIMCO Operating Partnership
operating results and net sales or AIMCO Operating Partnership may Agreement) generated by the AIMCO
refinancing proceeds available from adjust the annual distribution rate Operating Partnership during such
the disposition of your on the Preferred OP Units to the quarter to the general partner, the
partnership's assets. lower of (i) % plus the annual special limited partner and the
interest rate then applicable to holders of Common OP Units on the
U.S. Treasury notes with a maturity record date established by the
of five years, and (ii) the annual general partner with respect to
dividend rate on the most recently such quarter, in accordance with
issued AIMCO non-convertible their respective interests in the
preferred stock which ranks on a AIMCO Operating Partnership on such
parity with its Class H Cumu- record date. Holders of any other
lative Preferred Stock. Such Preferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may not sell, There is no public market for the There is no public market for the
transfer, encumber or otherwise Preferred OP Units and the OP Units. The AIMCO Operating Part-
dispose by operation of law or Preferred OP Units are not listed nership Agreement restricts the
otherwise of the whole or any part on any securities exchange. The transferability of the OP Units.
of his interest in your partnership Preferred OP Units are subject to Until the expiration of one year
except by written instrument restrictions on transfer as set from the date on
satisfactory
</TABLE>
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<PAGE> 1736
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
in form to the general partner, forth in the AIMCO Operating which an OP Unitholder acquired OP
accompanied by the assurance of the Partnership Agreement. Units, subject to certain
genuineness and effectiveness of exceptions, such OP Unitholder may
each such signature and the Pursuant to the AIMCO Operating not transfer all or any portion of
obtaining of any federal and/or Partnership Agreement, until the its OP Units to any transferee
state governmental approval, if expiration of one year from the without the consent of the gen-
any, as may be reasonably required date on which a holder of Preferred eral partner, which consent may be
by the general partner. A minimum OP Units acquired Preferred OP withheld in its sole and absolute
of twenty units may be transferred, Units, subject to certain discretion. After the expiration of
except for IRA or Keogh plans, and exceptions, such holder of one year, such OP Unitholder has
except for transfers by gift or Preferred OP Units may not transfer the right to transfer all or any
inheritance, intrafamily transfers, all or any portion of its Pre- portion of its OP Units to any
family dissolutions and transfers ferred OP Units to any transferee person, subject to the satisfaction
to affiliates. No assignment is without the consent of the general of certain conditions specified in
valid or effective unless it is in partner, which consent may be the AIMCO Operating Partnership
compliance with the conditions con- withheld in its sole and absolute Agreement, including the general
tained in your partnership's discretion. After the expiration of partner's right of first refusal.
agreement of limited partnership. one year, such holders of Preferred See "Description of OP Units --
No partner may make any assignment OP Units has the right to transfer Transfers and Withdrawals" in the
of all or any part of his interest all or any portion of its Preferred accompanying Prospectus.
if said transfer or assignment OP Units to any person, subject to
would, when considered with all the satisfaction of certain After the first anniversary of
other transfers made during the conditions specified in the AIMCO becoming a holder of Common OP
same applicable 12-month period, Operating Partnership Agreement, Units, an OP Unitholder has the
cause a termination of your including the general partner's right, subject to the terms and
partnership for federal or any right of first refusal. conditions of the AIMCO Operating
applicable state income tax Partnership Agreement, to require
purposes. Such transferee may be After a one-year holding period, a the AIMCO Operating Partnership to
substituted as a limited partner holder may redeem Preferred OP redeem all or a portion of the
if, in addition to the above re- Units and receive in exchange Common OP Units held by such party
quirements: (1) the assignor therefor, at the AIMCO Operating in exchange for a cash amount based
designates such intention in the Partnership's option, (i) subject on the value of shares of Class A
instrument of assignment, (2) the to the terms of any Senior Units, Common Stock. See "Description of
written consent of the general cash in an amount equal to the OP Units -- Redemption Rights" in
partner is obtained, the granting Liquidation Preference of the the accompanying Prospectus. Upon
of which is in the general Preferred OP Units tendered for receipt of a notice of redemption,
partner's sole discretion and in redemption, (ii) a number of shares the AIMCO Operating Partnership
accordance with your partnership's of Class I Cumulative Preferred may, in its sole and absolute
agreement of limited partnership, Stock of AIMCO that pay an discretion but subject to the
(3) the assignment instrument is in aggregate amount of dividends yield restrictions on the ownership of
form and substance satisfactory to equivalent to the distributions on Class A Common Stock imposed under
the general partner, (4) the the Preferred OP Units tendered for AIMCO's charter and the transfer
assignor and assignee duly execute redemption and are part of a class restrictions and other limitations
and acknowledge such other or series of preferred stock that thereof, elect to cause AIMCO to
instrument or instruments as the is then listed on the New York acquire some or all of the tendered
general partner may deem necessary Stock Exchange or another national Common OP Units in exchange for
or desirable and (5) the assignee securities exchange, or (iii) a Class A Common Stock, based on an
accepts, adopts and approves in number of shares of Class A Common exchange ratio of one share of
writing all of the terms and Stock of AIMCO that is equal in Class A Common Stock for each Com-
provisions of your partnership's Value to the Liquidation Preference mon OP Unit, subject to adjustment
agreement of limited partnership. of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 1737
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 1738
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 1739
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 1740
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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<PAGE> 1741
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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<PAGE> 1742
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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<PAGE> 1743
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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<PAGE> 1744
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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<PAGE> 1745
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and that of CCEP/2 and the manager of your partnership's property
and the manager of CCEP/2's property. The general partner of your partnership
receives no fee for its services but may receive reimbursement for expenses
incurred in its capacity as general partner of your partnership. The general
partner of your partnership received reimbursement of $340,000 in 1996, $278,000
in 1997 and $149,000 during the first six months of 1998. The general partner of
CCEP/2 Concap Holdings, Inc., received $763,000 in 1996, $830,000 in 1997 and
$384,000 for the first six months of 1998. ConCap Holdings, Inc., as property
manager of CCEP/2 also received fees of $883,000 in 1996, $881,000 in 1997 and
$440,000 for the first six months of 1998.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans
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<PAGE> 1746
may change based on future circumstances. Any such future offers that we might
make could be for consideration that is more or less than the consideration we
are currently offering.
YOUR PARTNERSHIP
GENERAL
Consolidated Capital Institutional Properties/2 was organized on April 12,
1983, under the laws of the State of California.
Your partnership was formed for the purpose of making loans to a
predecessor partnership of CCEP/2. CCEP/2's indebtedness in respect of the loans
made to it and its predecessor partnership by your partnership now is
represented by the Loan. The Loan is secured by deeds of trust or mortgages on
the CCEP/2 properties. The non-recourse provisions of the Loan mean that
CCEP/2's obligation to repay the Loan is secured only by the value of the
properties of CCEP/2, and your partnership has no right to make further claims
against CCEP/2 other than to the extent of the value of those properties. The
loan agreement provides that interest on the outstanding principal balance
accrues at a fixed rate (10% per year), although such interest is payable only
to the extent CCEP/2 has "excess cash flow" (generally defined as net cash flow
from operations after third-party debt service and capital improvements).
Accrued unpaid interest is added to principal. At March 31, 1998, the aggregate
outstanding principal balance of the Loan (including interest accrued and added
to principal pursuant to the terms of the Loan) was approximately $240,084,000.
This amount is substantially greater than the estimated fair market value of the
CCEP/2 properties (which are the only source of repayment for the Loan). Under
the terms of the Loan, any net proceeds from sales or refinancings of the CCEP/2
properties are paid to the partnership, after payment of a 3% disposition fee to
the general partner of CCEP/2. The amount of cash flow received by your
partnership pursuant to the terms of the Loan depends heavily on the discretion
exercised by the general partner of CCEP/2 with respect to sales, refinancing
of, or obtaining financing on, any CCEP/2 property.
CCEP/2's investment portfolio currently consists of six office buildings
and four residential apartment complexes, all of which serve as collateral for
the Loan. The deeds of trust in favor of your partnership that encumber the
CCEP/2 properties are subordinated to the mortgage liens in favor of
unaffiliated third parties that secure an aggregate indebtedness of $32,764,720
(as of June 30, 1998). Those properties are as follows: a 115,829 square-foot
commercial complex in Southfield, Michigan; a 101,823 square-foot commercial
complex in Southfield, Michigan; a 64,762 square-foot commercial complex in
Southfield, Michigan; a 173,991 square-foot commercial complex in Southfield,
Michigan; a 262,457 square-foot commercial complex in Richmond, Virginia; a
159,416 square-foot commercial complex in Santa Ana, California; a 90-unit
residential apartment complex in Littleton, Colorado; a 176-unit residential
apartment complex in Woodbridge, Illinois; a 330-unit residential apartment
complex in Cincinnati, Ohio; and a 257-unit residential apartment complex in
Houston, Texas.
Your partnership's sole investment property was sold in September 1996,
and, therefore, your partnership has no real estate assets.
The general partner of your partnership is ConCap Equities, Inc., which is
a majority-owned subsidiary of AIMCO. ConCap Holdings, Inc., which is a
majority-owned subsidiary of AIMCO, serves as manager of the properties owned by
Consolidated Capital Equity Properties/Two. ConCap Holdings, Inc., an affiliate
of your general partner and the sole general partner of CCEP/2, has full
discretion in conducting CCEP/2's business. As of February 28, 1998, there were
909,133.8 units of limited partnership interest issued and outstanding, which
were held of record by 34,705 limited partners. Your partnership's principal
executive offices are located at 1873 South Bellaire Street, 17th Floor, Denver,
Colorado 80222, and its telephone number at that address is (303) 757-8101.
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<PAGE> 1747
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-K for the year ended December 31, 1997;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
Your partnership was formed for the purpose of making loans to a
predecessor partnership of Consolidated Capital Equity Properties/Two.
Consolidated Capital Equity Properties/Two's indebtedness in respect of the
loans made to it and its predecessor partnership by your partnership is
represented by the Loan, which is secured by properties of Consolidated Capital
Equity Properties/Two. According to the prospectus, dated July 22, 1983, Equity
Partners/Two (Consolidated Capital Equity Properties/Two's predecessor in
interest) anticipated that it would sell and/or refinance its properties, and
consequently repay the loan, approximately 12 years (subject to its right to
extend the loan up to two additional years beyond its initial ten-year term)
after their acquisition, depending on, among other things, the current real
estate and money markets, economic climate and income tax consequences to the
limited partners. Under your partnership's agreement of limited partnership, the
term of the partnership will continue until December 31, 2013, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
CCEP/2's partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates
CCEP/2's property, establishes rental policies and rates and directs marketing
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<PAGE> 1748
activities. The property manager also is responsible for maintenance, the
purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, except in the case of negligence or
misconduct, the general partner and its affiliate or agents acting on their
behalf are not liable, responsible or accountable in damages or otherwise to
your partnership (in any action, including a partnership derivative suit) or to
any of the limited partners for the doing of any act or the failure to do any
act, the effect of which may cause or result in loss or damage to your
partnership, if done in good faith to promote the best interests of your
partnership. As a result, unitholders might have a more limited right of action
in certain circumstances than they would have in the absence of such a provision
in your partnership's agreement of limited partnership. The general partner of
your partnership is majority-owned by AIMCO. See "Conflicts of Interest."
The general partner and its affiliates or agents are entitled to
indemnification by your partnership from assets of your partnership, or as an
expense of your partnership, but not from the limited partners, against any
liability or loss, as a result of any claim or legal proceeding (whether or not
the same proceeds to judgment or is settled or otherwise brought to a
conclusion) relating to the performance or non-performance of any act concerning
the activities of your partnership except in the case where the general partner
or its affiliates or agents are guilty of bad faith, negligence, misconduct or
reckless disregard of duty, provided such act or omission was done in good faith
to promote the best interests of your partnership. The indemnification
authorized by your partnership's agreement of limited partnership includes the
payment of reasonable attorneys' fees and other expenses (not limited to taxable
costs) incurred in settling or defending any claims, threatened action or
finally adjudicated legal proceedings. Notwithstanding the foregoing, neither
the general partner nor any officer, director, employee, agent, subsidiary or
assign of the general partner or its affiliates are indemnified from any
liability, loss or damage incurred by them in connection with (1) any claim or
settlement involving allegations that the Securities Act of 1933 was violated by
the general partner or by any such other person or entity unless: (i) the
general partner or other persons or entities seeking indemnification are
successful in defending such action and (ii) such indemnification is
specifically approved by a court of law which is advised as to the current
position of both the Securities and Exchange Commission and the California
Commissioner of Corporations regarding indemnification for violations of
securities laws, or (2) any liability imposed by law, including liability for
fraud, bad faith or negligence.
Your partnership must at all times maintain public liability insurance in
amounts determined by the general partner for the protection of your partnership
and cash of its members.
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $255.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 3.27
January 1, 1996 - December 31, 1996......................... 0.00
January 1, 1997 - December 31, 1997......................... 10.98
January 1, 1998 - June 30, 1998............................. 1.65
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 21.2% interest in your partnership, including 909,133.8 units held by us and
the interest held by ConCap Equities, Inc., as general partner of your
partnership. Except as set forth above, neither the AIMCO Operating Partnership,
nor, to the best of its knowledge, any of its affiliates, (i) beneficially own
or have a right to acquire any units,
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<PAGE> 1749
(ii) have effected any transactions in the units in the past 60 days, or
(iii) have any contract, arrangement, understanding or relationship with any
other person with respect to any securities of your partnership, including, but
not limited to, contracts, arrangements, understandings or relationships
concerning transfer or voting thereof, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received reimbursement for expenses
in respect of its capacity as general partner of your partnership as described
in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $325,000
1995........................................................ 480,000
1996........................................................ 340,000
1997........................................................ 278,000
1998 (through June 30)...................................... 149,000
</TABLE>
ConCap Holdings, Inc. as general partner of CCEP/2 received compensation as
described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $ 968,000
1995........................................................ 1,021,000
1996........................................................ 763,000
1997........................................................ 830,000
1998 (through June 30)...................................... 384,000
</TABLE>
In addition, ConCap Holdings, Inc., a majority-owned subsidiary of AIMCO
manages the property of CCEP/2. CCEP/2 has historically paid the property
management fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $511,000
1995........................................................ 853,000
1996........................................................ 883,000
1997........................................................ 881,000
1998 (through June 30)...................................... 440,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
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<PAGE> 1750
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
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LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Consolidated Capital Institutional
Properties/2 appearing in Consolidated Capital Institutional Properties/2 Annual
Report (Form 10-K) for the year ended December 31, 1997, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
S-82
<PAGE> 1752
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-K filed with
the Securities and Exchange Commission for the years ended December 31,
1995, 1996 and 1997, and quarterly report on Form 10-Q for the period
ending June 30, 1998, which the Partnership's management has indicated to
be the most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 1753
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1754
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 1755
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 1756
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1757
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1758
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1759
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexington Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1760
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1761
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF THE
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF
OFFER AND TO RENDER AN OPINION AS TO THE YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND THE
PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $158.00 per
unit and an affiliate estimated the net liquidation value of your units
to be $156.61 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a few properties to holding an interest in
our large portfolio of properties. In the future, the properties owned by
your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1762
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-19
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Consolidated
Capital Institutional Properties/3......... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-55
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-56
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-65
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
</TABLE>
i
<PAGE> 1763
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-77
Originally Anticipated Term of the
Partnership................................ S-77
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-78
Property Management.......................... S-78
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-78
Distributions................................ S-79
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-79
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-80
LEGAL MATTERS.................................. S-81
EXPERTS........................................ S-81
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1764
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Consolidated Capital Institutional Properties/3. For each unit that you
tender, you may choose to receive of our Tax-Deferral %
Partnership Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred
to as "Common OP Units"), or $ in cash (subject, in each case to
adjustment for any distributions paid to you during the offer period). If
you like, you can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in ConCap Equities, Inc., the
managing general partner of your partnership (the "general partner"), and
the company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1765
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1766
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $36.13 per unit for the year ended
December 31, 1997 (equivalent to $ on an annual basis). We will pay
fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1767
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $20.00 per unit to $134.03 per unit
from January 1, 1997 to September 30, 1998. As of June 30, 1998, your
general partner estimated the net asset value of your units to be $158.00
per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $156.61 per unit. However, we do not
believe that these valuations represent the current fair market value of
your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100.00 liquidation
preference of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 1768
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of 20
units (except for IRA Keogh Plans, and except for transfers by gift or
inheritance, intrafamily transfers, family dissolutions and transfers to
affiliates.)
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 1769
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
<PAGE> 1770
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
S-7
<PAGE> 1771
exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$158.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $156.61 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $20.00 per unit to $134.03 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
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FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the
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holders of OP Units. Such securities could have priority over the OP Units as to
cash flow, distributions and liquidation proceeds. The effect of any such
issuance may be to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our
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investors unless certain financial tests or other criteria are satisfied. In
some cases, our subsidiaries are subject to similar provisions, which may
restrict their ability to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
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POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
25.1% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your partnership
to sell its assets, distribute the net liquidation proceeds to its partners
in accordance with your partnership's agreement of limited partnership, and
then dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes,
at their option. If your partnership were to sell its assets and liquidate,
you and your partners would not need to rely upon capitalization of income
or other valuation methods to estimate the fair market value of your
partnership's assets. Instead, such assets would be valued through
negotiations with prospective purchasers. However, a liquidating sale of
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
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Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have
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the opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
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Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 1780
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $20.00 to $134.03
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 1781
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee of up to 9% of Distributed Cash From Operations received
by the limited partners for its services as general partner of your partnership
and may receive reimbursement for expenses incurred in such capacity. Your
general partner was paid $187,000 in compensation and reimbursements for the
first six months of 1998. The property manager received management fees of
$384,000 for the first six months of 1998. We have no current intention of
changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Consolidated Capital Institutional Properties/3 was organized on May 23,
1984 under the laws of the State of California. Its primary business is real
estate ownership and related operations. Your partnership was formed for the
purpose of making investments in various types of real properties which offer
potential capital
S-18
<PAGE> 1782
appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of (a) 1661 apartment
units in 8 properties located in Washington, Florida, Michigan, Utah, North
Carolina, and Colorado and (b) two commercial office buildings, with total
square feet of 277,000, in Florida and California. One of the properties, City
Heights Apartments, is currently under contract to be sold to an unaffiliated
party in November 1998. The general partner of your partnership is ConCap
Equities, Inc., which is a majority-owned subsidiary of AIMCO. A majority-owned
subsidiary of AIMCO serves as manager of the properties owned by your
partnership. As of September 15, 1998 there were 91,557.20 units of limited
partnership interest issued and outstanding, which were held of record by 15,364
limited partners. Your partnership's principal executive offices are located at
1873 South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its
telephone number at that address is (303) 757-8101. For additional information
about your partnership, please refer to the annual and quarterly reports
prepared by your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1783
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995 and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1784
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1785
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1786
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1787
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1788
SUMMARY FINANCIAL INFORMATION OF CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
The summary financial information of Consolidated Capital Institutional
Properties/3 for the six months ended June 30, 1998 and 1997 is unaudited. The
summary financial information for Consolidated Capital Institutional
Properties/3 for the years ended December 31, 1997, 1996 and 1995 is based on
audited financial statements. This information should be read in conjunction
with such financial statements, including the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
incorporated by reference herein.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED
(UNAUDITED) DECEMBER 31,
----------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT FOR UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $ 7,740 $ 7,488 $15,173 $14,047 $12,708
Net Income (Loss)........................................... 1,446 1,074 1,936 1,153 (1,606)
Net Income (Loss) per limited partnership unit.............. 3.74 2.78 5.00 2.98 (4.20)
Distributions per limited partnership unit.................. -- 18.27 36.13 18.98 9.42
------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $47,126 $48,510 $47,852 $49,187 $45,877
Total Assets................................................ 58,571 63,407 57,086 69,537 62,863
Notes Payable............................................... 30,525 30,525 30,525 30,525 18,029
Partners' Capital........................................... 26,671 31,365 25,225 37,296 43,461
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CONSOLIDATED CAPITAL
PARTNERSHIP INSTITUTIONAL PROPERTIES/3
------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $36.13
</TABLE>
S-25
<PAGE> 1789
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $20.00 per unit to
$134.03 per unit from January 1, 1997 to September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$158.00 per unit. However, we do not believe that these valuations represent the
current fair market value of your units. We have retained Stanger to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $156.61 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 1790
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 1791
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the year ended December 31, 1997
were $36.13 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
S-28
<PAGE> 1792
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in the entity that manages the
properties owned by your partnership. Through subsidiaries, AIMCO currently
owns, in the aggregate, approximately a 25.1% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia
S-29
<PAGE> 1793
(the "Insignia Partnerships"). Such offers would provide liquidity for the
limited partners of the Insignia Partnerships. Such offers would also allow the
AIMCO Operating Partnership an opportunity to increase its ownership interest in
certain Insignia Partnerships which would provide a larger asset and capital
base and increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. During the first quarter of 1998, Insignia
Properties, LP, then an affiliate of Insignia and now our affiliate, commenced a
tender offer pursuant to which it acquired an additional 47,865.5 units
(representing approximately 12.3% of the number outstanding) at a cash purchase
price of $85.00 per unit on February 27, 1998.
Madison Partnership Liquidity Investors 64, L.L.C., which is unaffiliated
with Insignia and is not affiliated with AIMCO, commenced a tender offer for
$65.00 per unit and purchased shares in , 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
S-30
<PAGE> 1794
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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<PAGE> 1795
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 1796
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units. No
alternative, conditional or contingent tenders will be accepted. However, your
partnership's agreement of limited partnership requires that you tender a
minimum of 20 units (except for IRA or Keogh plans).
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
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<PAGE> 1798
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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<PAGE> 1799
Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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<PAGE> 1800
Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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<PAGE> 1801
pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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<PAGE> 1803
which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 46,772.20 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 12.21% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
- -------- ---------------- -------------- --------------
<S> <C> <C> <C>
Cedar Rim Apartments................. $ % $
City Heights Apartments..............
Hidden Cove by the Lake Apartments...
Lamplighter Park Apartments..........
Park Capitol Apartments..............
Tamarac Village I,II,III,IV..........
Williamsburg Manor Apartments........
Sandpiper I & II Apartments..........
South City Business Center...........
Corporate Center.....................
</TABLE>
S-48
<PAGE> 1812
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
S-49
<PAGE> 1813
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would
S-50
<PAGE> 1814
receive in exchange for each of your partnership's units. Distributions
with respect to your units for the year ended December 31, 1997 were $36.13
(equivalent to $ on an annualized basis). Therefore, distributions with
respect to the Preferred OP Units and Common OP Units that we are offering
are expected to be , immediately following our offer, than the
distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
partner of your partnership and the AIMCO Operating Partnership believe that the
valuation method described in "Valuation of Units" provides a meaningful
indication of value for residential apartment properties although there are
other ways to value real estate. A liquidation in the future might generate a
higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions
S-51
<PAGE> 1815
analyzed by it in arriving at the estimates of value would exist at the
time of the offer. The assumptions used have been determined by the general
partner of your partnership in good faith, and, where appropriate, are based
upon current and historical information regarding your partnership and current
real estate markets, and have been highlighted below to the extent critical to
the conclusions of the general partner of your partnership. The estimated values
in the following chart are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Actual results may vary
from those set forth below based on numerous factors, including interest rate
fluctuations, tax law changes, supply and demand for similar apartment
properties, the manner in which your partnership's property is sold and changes
in availability of capital to finance acquisitions of apartment properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $20.00 to $134.03
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 115,893 units (representing approximately
30.25% of the total outstanding units) was transferred (excluding units
transferred by Insignia to IPLP in December 1997 and in tender offers) in sale
transactions. Set forth in the table below are the high and low sales prices of
units for the quarterly periods from January 1, 1996 to September 30, 1998, as
reported by the general partner and by The Partnership Spectrum, which is an
independent, third-party source. The gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices;
thus the AIMCO Operating Partnership does not know whether the information
compiled by The Partnership Spectrum is accurate or complete. The transfer
paperwork submitted to the general partner often does not include the requested
price information or contains conflicting information as to the actual sales
price. Accordingly, you should not rely upon this information as being
completely accurate.
S-52
<PAGE> 1816
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $55.00 $ 97.00 (c) (c)
Second Quarter.................................. 34.00 97.00 $78.00 $ 97.00
First Quarter................................... 43.00 120.00 80.00 97.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................. 42.00 97.00 77.00 97.00
Third Quarter................................... 31.00 102.00 78.00 97.00
Second Quarter.................................. 21.00 111.00 71.00 100.00
First Quarter................................... 20.00 102.00 80.00 112.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 25.00 100.00 92.00 112.00
Third Quarter................................... 12.00 105.00 75.00 112.00
Second Quarter.................................. 14.32 100.00 -- --
First Quarter................................... 55.12 91.00 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve
S-53
<PAGE> 1817
additional selling expenses of % of the sale proceeds. The general
partner of your partnership believes this is a normal and customary cost of
property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Certain of your partnership's properties have been appraised in
the past several years by independent, third party appraisers (Joseph J. Blake &
Associates, Inc. ("Blake") or Koeppel Tener Real Estate Services, Inc. ("KTR")).
According to the appraisal reports, the scope of the appraisals included an
inspection of each property and an analysis of the respective surrounding
markets. In each case, the applicable independent appraiser relied principally
on the income capitalization approach to the valuation and secondarily on the
sales comparison approach, and represented that its report was prepared in
accordance with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice, and in compliance with the Appraisal Standards
set forth in the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (known as "FIRREA"). The estimated market values of the fee simple estate
of each of your partnership's properties specified in the most recent appraisal
reports for your partnership's properties which have been appraised within the
past three years are set forth in the table below, and copies of the summaries
of those appraisals have been filed as exhibits to the Purchaser's Tender Offer
Statement on Schedule 14D-1 filed with the SEC.
<TABLE>
<CAPTION>
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL APPRAISER
------------- ----------- --------- ---------
<S> <C> <C> <C>
Cedar Rim Apartments....................................... $ 4,500,000 04/26/96 Blake
City Heights Apartments.................................... $ 5,200,000 04/15/96 Blake
Hidden Cove by the Lake Apartments......................... $ 4,650,000 04/12/96 KTR
Lamplighter Park Apartments................................ $ 7,600,000 04/15/96 Blake
Park Capitol Apartments.................................... $ 5,200,000 11/07/95 Blake
Tamarac Village Apartments I, II, III, IV.................. $19,000,000 04/23/96 Blake
Williamsburg Manor Apartments.............................. $ 7,900,000 11/07/95 Blake
Sandpiper Apartments I & II................................ $ 7,800,000 10/15/95 Blake
</TABLE>
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in July 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $158. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the
S-54
<PAGE> 1818
AIMCO Operating Partnership believes that this estimate of net asset value per
unit does not necessarily represent either the fair market value of a unit or
the amount a limited partner reasonably could expect to receive if the
partnership's properties were sold and the partnership was liquidated. For this
reason, the AIMCO Operating Partnership considered this net asset value estimate
to be less meaningful in determining the offer consideration than the analysis
described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
S-55
<PAGE> 1819
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-K filed with the SEC for the years
ending December 31, 1995, 1996 and 1997, and the quarterly report on Form 10-Q
for the period ending June 30, 1998, which reports your partnership's management
has indicated to be the most current available financial statements; (iii)
reviewed descriptive information concerning your partnership's properties
provided by management, including location, number of units and unit mix or
square footage, age, and amenities; (iv) reviewed summary historical operating
statements for your partnership's properties for 1996 and 1997 and through June
30, 1998; (v) reviewed operating budgets for your partnership's properties for
1998, as prepared by your partnership; (vi) reviewed information prepared by
management relating to any debt encumbering your partnership's properties; (vii)
reviewed information regarding market rental rates and conditions for similar
properties in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improve-
S-56
<PAGE> 1820
ments, the terms of existing debt, encumbering your partnership's properties,
and expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders;
S-57
<PAGE> 1821
(e) the relative value of the cash, Preferred OP Units or Common OP Units to be
issued in connection with the offer; and (f) any adjustments made to determine
the offer consideration and the net amounts distributable to the unitholders,
including but not limited to, balance sheet adjustments to reflect your
partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the offer consideration
for distributions made by your partnership subsequent to the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-58
<PAGE> 1822
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
<TABLE>
<CAPTION>
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
Duration of Existence
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Distributable Cash from Operations (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2015. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
Purpose and Permitted Activities
Your partnership has been formed to lend funds in The purpose of the AIMCO Operating Partnership is to
return for participating notes secured by deeds of conduct any business that may be lawfully conducted by
trust on real properties as may from time to time be a limited partnership organized pursuant to the
acquired by those specified in your partnership's Delaware Revised Uniform Limited Partnership Act (as
agreement of limited partnership. Subject to restric- amended from time to time, or any successor to such
tions contained in your partnership's agreement of statute) (the "Delaware Limited Partnership Act"),
limited partnership including the prohibition against provided that such business is to be conducted in a
purchasing real property, directly or indirectly, your manner that permits AIMCO to be qualified as a REIT,
partnership may perform all acts necessary, advisable unless AIMCO ceases to qualify as a REIT. The AIMCO
or convenient to the business of your partnership. Operating Partnership is authorized to perform any and
all acts for the furtherance of the purposes and
business of the AIMCO Operating Partnership, provided
that the AIMCO Operating Partnership may not take, or
refrain from taking, any action which, in the judgment
of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
S-59
<PAGE> 1823
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 1,600,020 units for time to the limited partners and to other persons, and
cash to selected persons who fulfill the requirements to admit such other persons as additional limited
set forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. The general partner may No action or consent by the OP Unitholders is required
not acquire properties in exchange for units. in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, the general partner and its affiliates may funds or other assets to its subsidiaries or other
acquire units from time to time on their own behalf and persons in which it has an equity investment, and such
for their own benefit, provided that such right does persons may borrow funds from the AIMCO Operating
not create any preferences in rights or benefits in Partnership, on terms and conditions established in the
favor of such persons or permit them to buy units other sole and absolute discretion of the general partner. To
than at the same cash price and on the same terms as the extent consistent with the business purpose of the
are available to other non-affiliated limited partners. AIMCO Operating Partnership and the permitted
Your partnership may not make any loans to the general activities of the general partner, the AIMCO Operating
partner but the general partner may lend money to your Partnership may transfer assets to joint ventures,
partnership on terms, as to interest rates and other limited liability companies, partnerships,
finance charges and fees, not in excess of amounts that corporations, business trusts or other business
are charged by unrelated banks on comparable loans for entities in which it is or thereby becomes a
the same purpose, and, if a property is involved, in participant upon such terms and subject to such
the locality of the property. No prepayment charge or conditions consistent with the AIMCO Operating Part-
penalty will be required by the general partner on a nership Agreement and applicable law as the general
loan to your partnership. To the extent the general partner, in its sole and absolute discretion, believes
partner lends proceeds to your partnership, on an un- to be advisable. Except as expressly permitted by the
secured basis, such amounts will bear interest at an AIMCO Operating Partnership Agreement, neither the
amount not to exceed the lesser of the actual cost to general partner nor any of its affiliates may sell,
the general partner or the most recent prime rate of transfer or convey any property to the AIMCO Operating
interest charged by Bank of America, N.A., San Partnership, directly or indirectly, except pursuant to
Francisco main office, in effect on the date such loan transactions that are determined by the general partner
is first created. However, the general partner may not in good faith to be fair and reasonable.
obtain any long-term financing from the general
partner. The general partner may not cause your
partnership to enter into any agreements with the
general partner or its affiliates which are not subject
to termination without penalty by either party upon not
more than sixty days' written notice. Your partnership
may not purchase or lease, directly or indirectly, any
property from the general partner or its affiliates,
from any investor program in which the general partner
or any of their affiliates have an interest and may not
sell or lease, directly or indirectly, any of its
property to any of the above parties.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to obligate and bind your partnership and to take such restrictions on borrowings, and the general partner has
action as the general partner deems necessary or full power and authority to borrow money on behalf of
advisable, including, without limitation, making, the AIMCO Operating Partnership. The AIMCO Operating
executing and delivering loan agreements, mort- Partnership has credit
</TABLE>
S-60
<PAGE> 1824
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
gages, security agreements, promissory notes, documents agreements that restrict, among other things, its
related to mortgage-backed securities, and other ability to incur indebtedness. See "Risk
documents as provided for in your partnership's Factors -- Risks of Significant Indebtedness" in the
agreement of limited partnership. Your partnership may accompanying Prospectus.
not incur any nonrecourse indebtedness wherein the
lender will have or acquire, at any time as a result of
making the loan, any direct or indirect interest in the
profits, capital or property of your partnership other
than as a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner, upon reasonable request, to with a statement of the purpose of such demand and at
inspect and copy during normal business hours the such OP Unitholder's own expense, to obtain a current
register kept by your partnership which lists the list of the name and last known business, residence or
names, addresses and business telephone numbers of all mailing address of the general partner and each other
limited partners and the number of units owned by each OP Unitholder.
limited partner. Upon request of a limited partner, the
general partner will promptly mail to such limited
partner a copy of the investor list. If the general
partner neglects or refuses to mail a copy of the
investor list as requested, the general partner may be
liable to the limited requesting the list for the cost
incurred by the limited partner in compelling the
production of the list and for actual damages incurred
by the limited partner.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership. Subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership, the right to vote on certain matters described under
the general partner, on behalf of your partnership, may "Comparison of Ownership of Your Units and AIMCO OP
take any action it deems necessary or advisable in Units -- Voting Rights" below. The general partner may
connection with the business of your partnership not be removed by the OP Unitholders with or without
without the consent of the limited partners. No limited cause.
partner has any authority or right to act for or bind
your partnership or participate in or have any control In addition to the powers granted a general partner of
over your partnership business except as required by a limited partnership under applicable law or that are
law. granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, except in the case of negligence or the AIMCO Operating Partnership Agreement, the general
misconduct, the general partner and its affiliate or partner is not liable to the AIMCO Operating
agents acting on their behalf are not liable, responsi- Partnership for losses sustained, liabilities incurred
ble or accountable in damages or otherwise to your or benefits not derived as a result of errors in
partnership (in
</TABLE>
S-61
<PAGE> 1825
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
any action, including a partnership derivative suit) or judgment or mistakes of fact or law of any act or
to any of the limited partners for the doing of any act omission if the general partner acted in good faith.
or the failure to do any act, the effect of which may The AIMCO Operating Partnership Agreement provides for
cause or result in loss or damage to your partnership, indemnification of AIMCO, or any director or officer of
if done in good faith to promote the best interests of AIMCO (in its capacity as the previous general partner
your partnership. The general partner and its of the AIMCO Operating Partnership), the general
affiliates or agents are entitled to indemnification by partner, any officer or director of general partner or
your partnership from assets of your partnership, or as the AIMCO Operating Partnership and such other persons
an expense of your partnership, but not from the as the general partner may designate from and against
limited partners, against any liability or loss, as a all losses, claims, damages, liabilities, joint or
result of any claim or legal proceeding (whether or not several, expenses (including legal fees), fines,
the same proceeds to judgment or is settled or settlements and other amounts incurred in connection
otherwise brought to a conclusion) relating to the with any actions relating to the operations of the
performance or non-performance of any act concerning AIMCO Operating Partnership, as set forth in the AIMCO
the activities of your partnership except in the case Operating Partnership Agreement. The Delaware Limited
where the general partner or its affiliates or agents Partnership Act provides that subject to the standards
are guilty of bad faith, negligence, misconduct or and restrictions, if any, set forth in its partnership
reckless disregard of duty, provided such act or agreement, a limited partnership may, and shall have
omission was done in good faith to promote the best the power to, indemnify and hold harmless any partner
interests of your partnership. The indemnification or other person from and against any and all claims and
authorized by your partnership's agreement of limited demands whatsoever. It is the position of the
partnership includes the payment of reasonable Securities and Exchange Commission that indemnification
attorneys' fees and other expenses (not limited to of directors and officers for liabilities arising under
taxable costs) incurred in settling or defending any the Securities Act is against public policy and is
claims, threatened action or finally adjudicated legal unenforceable pursuant to Section 14 of the Securities
proceedings. Notwithstanding the foregoing, neither the Act of 1933.
general partner nor any officer, director, employee,
agent, subsidiary or assign of the general partner or
its affiliates are indemnified from any liability, loss
or damage incurred by them in connection with (1) any
claim or settlement involving allegations that the
Securities Act of 1933 was violated by the general
partner or by any such other person or entity unless:
(i) the general partner or other persons or entities
seeking indemnification are successful in defending
such action and (ii) such indemnification is
specifically approved by a court of law which is
advised as to the current position of both the
Securities and Exchange Commission and the California
Commissioner of Corporations regarding indemnifica-
tion for violations of securities laws; or (2) any
liability imposed by law, including liability for
fraud, bad faith or negligence.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove or elect a has exclusive management power over the business and
general partner upon a vote of the limited partners affairs of the AIMCO Operating Partnership. The general
owning a majority of the outstanding units. No limited partner may not be removed as general partner of the
partner may substitute a transferee of his units in AIMCO Operating Partnership by the OP Unitholders with
such limited partner's place without the consent of the or without cause. Under the AIMCO Operating Partnership
general partner which may be withheld at the sole Agreement, the general partner may, in its sole
discretion of the general partner. discretion, prevent a transferee of an OP Unit from
becoming a substituted limited partner pursuant to the
AIMCO Operating Partnership Agreement. The general
partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners to add to the representations, the general partner may, without the consent of the OP
duties, or obligations of the general partner or its Unitholders, amend the AIMCO Operating Partnership
affiliates or to surrender any rights or powers granted Agreement, amendments to the AIMCO Operating
to the general partner or its affiliates for the Partnership Agreement require the consent of the
benefit of the limited partners, to comply with federal holders of a majority of the outstanding Common OP
and state securities laws and to cure any ambiguities. Units, excluding AIMCO and certain other limited
Other amendments to your partner- exclusions
</TABLE>
S-62
<PAGE> 1826
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship's agreement of limited partnership must be (a "Majority in Interest"). Amendments to the AIMCO
approved by the limited partners owning more than 50% Operating Partnership Agreement may be proposed by the
of the units. However, the limited partners may not general partner or by holders of a Majority in
amend your partnership's agreement of limited Interest. Following such proposal, the general partner
partnership (1) to extend your partnership term or (2) will submit any proposed amendment to the OP
to alter the rights of the general partner to receive Unitholders. The general partner will seek the written
compensation, return of invested capital, allocations, consent of the OP Unitholders on the proposed amend-
and distributions, without the consent of the general ment or will call a meeting to vote thereon. See
partner. Also, a unanimous vote of the limited partners "Description of OP Units -- Amendment of the AIMCO
is required to amend the provision in your Operating Partnership Agreement" in the accompanying
partnership's agreement of limited partnership dealing Prospectus.
with substituted limited partners.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership receives an The general partner does not receive compensation for
annual fee equal to 9% of Distributed Cash From its services as general partner of the AIMCO Operating
Operations received by the limited partners for its Partnership. However, the general partner is entitled
services as general partner of your partnership and may to payments, allocations and distributions in its
receive reimbursement for expenses incurred in such capacity as general partner of the AIMCO Operating
capacity. Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
Liability of Investors
<TABLE>
<S> <C>
Under California law, a limited partner is not bound by Except for fraud, willful misconduct or gross
the obligations of your partnership. A limited partner negligence, no OP Unitholder has personal liability for
is liable only to make payments of his capital the AIMCO Operating Partnership's debts and
contribution when due under your partnership's obligations, and liability of the OP Unitholders for
agreement of limited partnership. After its capital the AIMCO Operating Partnership's debts and obligations
contribution is fully paid, no limited partner will, is generally limited to the amount of their invest-
except as otherwise required by applicable law, be ment in the AIMCO Operating Partnership. However, the
required to make any further capital contributions or limitations on the liability of limited partners for
lend any funds to your partnership. the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner must diligently and partnership agreement, Delaware law generally requires
faithfully devote as much of its time, but is not a general partner of a Delaware limited partnership to
required to devote its full time, to the business of adhere to fiduciary duty standards under which it owes
your partnership and must at all times act in a its limited partners the highest duties of good faith,
fiduciary manner toward your partnership and the fairness and loyalty and which generally prohibit such
limited partners. The general partner at all times has general partner from taking any action or engaging in
a fiduciary responsibility for the safekeeping and use any transaction as to which it has a conflict of
of all partnership funds and assets. The general interest. The AIMCO Operating Partnership Agreement
partner may assign some of its general partner expressly authorizes the general partner to enter into,
functions to an affiliate; provided, however, that on behalf of the AIMCO Operating Partnership, a right
notwithstanding any such assignment, the general of first opportunity arrangement and other conflict
partner will retain full responsibility to your avoidance agreements with various affiliates of the
partnership for the satisfactory performance of all AIMCO Operating Partnership and the general partner, on
partnership general partner duties. The general partner such
may not commingle
</TABLE>
S-63
<PAGE> 1827
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
funds of your partnership with any other person. terms as the general partner, in its sole and absolute
Subject to its fiduciary duties, general partner and discretion, believes are advisable. The AIMCO Operating
its affiliates may engage in whatever activities they Partnership Agreement expressly limits the liability of
choose, whether the same are competitive with your the general partner by providing that the general
partnership or otherwise, without having or incurring partner, and its officers and directors will not be
any obligation to offer any interest in such activities liable or accountable in damages to the AIMCO Operating
to your partnership or any party hereto. The Partnership, the limited partners or assignees for
obligations of the parties are, therefore, limited errors in judgment or mistakes of fact or law or of any
solely to those arising from the acquisition and act or omission if the general partner or such director
holding of your partnership's properties. or officer acted in good faith. See "Description of OP
Units -- Fiduciary Responsibilities" in the
accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and loss from the AIMCO Operating
Partnership can only be offset against other income and
loss from the AIMCO Operating Partnership). Income of
the AIMCO Operating Partnership, however, attributable
to dividends from the Management Subsidiaries (as
defined below) or interest paid by the Management
Subsidiaries does not qualify as passive activity
income and cannot be offset against losses from
"passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
S-64
<PAGE> 1828
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove or elect a Prospectus. So long as any institution of bankruptcy
general partner; and approve other Preferred OP Units are outstand- proceedings, an assignment for the
matters as otherwise provided in ing, in addition to any other vote benefit of creditors and certain
your partnership's agreement of or consent of partners required by transfers by the general partner of
limited partnership. Unless prior law or by the AIMCO Operating its interest in the AIMCO Operating
consent of the limited partners Partnership Agreement, the Partnership or the admission of a
holding a majority of the units of affirmative vote or consent of successor general partner.
your partnership is obtained, the holders of at least 50% of the
general partner is prohibited from outstanding Preferred OP Units will Under the AIMCO Operating Partner-
(1) selling substantially all of be necessary for effecting any ship Agreement, the general partner
your partnership's assets in a amendment of any of the provisions has the power to effect the
single sale or in multiple sales in of the Partnership Unit Desig- acquisition, sale, transfer,
the same 12-month period, except in nation of the Preferred OP Units exchange or other disposition of
the orderly liquidation and winding that materially and adversely any assets of the AIMCO Operating
up of the business, (2) pledging affects the rights or preferences Partnership (including, but not
the credit of your partnership in of the holders of the Preferred OP limited to, the exercise or grant
any way except in the ordinary Units. The creation or issuance of of any conversion, option,
course of business, (3) executing any class or series of partnership privilege or subscription right or
or delivering any assignment for units, including, without any other right available in
the benefit of the creditors of limitation, any partnership units connection with any assets at any
your partnership, and (4) that may have rights senior or time held by the AIMCO Operating
releasing, assigning or superior to the Preferred OP Units, Partnership) or the merger,
transferring a partnership claim, shall not be deemed to materially consolidation, reorganization or
security, commodity or any other adversely affect the rights or other combination of the AIMCO
asset in your partnership without preferences of the holders of Operating Partnership with or into
full and adequate consideration. Preferred OP Units. With respect to another entity, all without the
the exercise of the above de- consent of the OP Unitholders.
A general partner may cause the scribed voting rights, each
dissolution of your partnership by Preferred OP Units shall have one The general partner may cause the
retiring. Your partnership may be (1) vote per Preferred OP Unit. dissolution of the AIMCO Operating
continued by the remaining general Partnership by an "event of
partner or, if none, the limited withdrawal," as defined in the
partners may agree to continue your Delaware Limited Partnership Act
partnership by electing a successor (including, without limitation,
general partner upon the vote of bankruptcy), unless, within 90 days
holders of more than 50% of the after the withdrawal, holders of a
units within 60 days after the "majority in interest," as defined
retirement of the general partner. in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operat-
</TABLE>
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<PAGE> 1829
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
ing Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Distributable Cash $ per Preferred OP Unit; tribute quarterly all, or such
From Operations are to be made provided, however, that at any time portion as the general partner may
quarterly during the fiscal year. and from time to time on or after in its sole and absolute discretion
The distributions payable to the the fifth anniversary of the issue determine, of Available Cash (as
partners are not fixed in amount date of the Preferred OP Units, the defined in the AIMCO Operating
and depend upon the operating AIMCO Operating Partnership may Partnership Agreement) generated by
results and net sales or adjust the annual distribution rate the AIMCO Operating Partnership
refinancing proceeds available from on the Preferred OP Units to the during such quarter to the general
the disposition of your lower of (i) % plus the annual partner, the special limited
partnership's assets. interest rate then applicable to partner and the holders of Common
U.S. Treasury notes with a maturity OP Units on the record date
of five years, and (ii) the annual established by the general partner
dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
lative Preferred Stock. Such Holders of any other Preferred OP
distributions will be cumulative Units issued in the future may have
from the date of original issue. priority over the general partner,
Holders of Preferred OP Units will the special limited partner and
not be entitled to receive any holders of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on the Available Cash, distributions upon
Preferred OP Units. No interest, or liquidation or other distributions.
sum of money in lieu of interest, See "Per Share and Per Unit Data"
shall be payable in respect of any in the accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior
</TABLE>
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<PAGE> 1830
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may not sell, There is no public market for the There is no public market for the
transfer, encumber or otherwise Preferred OP Units and the OP Units. The AIMCO Operating Part-
dispose by operation of law or Preferred OP Units are not listed nership Agreement restricts the
otherwise of the whole or any part on any securities exchange. The transferability of the OP Units.
of his interest in your partnership Preferred OP Units are subject to Until the expiration of one year
except by written instrument restrictions on transfer as set from the date on which an OP
satisfactory in form to the general forth in the AIMCO Operating Unitholder acquired OP Units,
partner, accompanied by the Partnership Agreement. subject to certain exceptions, such
assurance of the genuineness and OP Unitholder may not transfer all
effectiveness of each such Pursuant to the AIMCO Operating or any portion of its OP Units to
signature and the obtaining of any Partnership Agreement, until the any transferee without the consent
federal and/or state governmental expiration of one year from the of the general partner, which
approval, if any, as may be date on which a holder of Preferred consent may be withheld in its sole
reasonably required by the general OP Units acquired Preferred OP and absolute discretion. After the
partner. A minimum of twenty units Units, subject to certain expiration of one year, such OP
may be transferred, except for IRA exceptions, such holder of Unitholder has the right to
or Keogh plans, and except for Preferred OP Units may not transfer transfer all or any portion of its
transfers by gift or inheritance, all or any portion of its Pre- OP Units to any person, subject to
intrafamily transfers, family ferred OP Units to any transferee the satisfaction of certain
dissolutions and transfers to without the consent of the general conditions specified in the AIMCO
affiliates. No assignment is valid partner, which consent may be Operating Partnership Agreement,
or effective unless made in withheld in its sole and absolute including the general partner's
compliance with the conditions discretion. After the expiration of right of first refusal. See
contained herein. No partner may one year, such holders of Preferred "Description of OP Units --
make any assignment of all or any OP Units has the right to transfer Transfers and Withdrawals" in the
part of his interest if said all or any portion of its Preferred accompanying Prospectus.
transfer or assignment would, when OP Units to any person, subject to
considered with all other transfers the satisfaction of certain After the first anniversary of
made during the same applicable conditions specified in the AIMCO becoming a holder of Common OP
12-month period, cause a Operating Partnership Agreement, Units, an OP Unitholder has the
termination of your partnership for including the general partner's right, subject to the terms and
federal or any applicable state right of first refusal. conditions of the AIMCO Operating
income tax purposes. Such Partnership Agreement, to require
transferee may be substituted as a After a one-year holding period, a the AIMCO Operating Partnership to
limited partner if, in addition to holder may redeem Preferred OP redeem all or a portion of the
the above requirements: (1) the Units and receive in exchange Common OP Units held by such party
assignor designates such intention therefor, at the AIMCO Operating in exchange for a cash amount based
in the instrument of assignment, Partnership's option, (i) subject on the value of shares of Class A
(2) the written consent of the gen- to the terms of any Senior Units, Common Stock. See "Description of
eral partner is obtained, the cash in an amount equal to the OP Units -- Redemption Rights" in
granting of which is in the general Liquidation Preference of the the accompanying Prospectus. Upon
partner's sole discretion and in Preferred OP Units tendered for receipt of a notice of redemption,
accordance with your part- redemption, (ii) a number of shares the AIMCO Operating Partnership
nership's agreement of limited of Class I Cumulative Preferred may, in its sole and absolute
partnership, (3) the assignment Stock of AIMCO that pay an discretion but subject to the
instrument is in form and substance aggregate amount of dividends yield restrictions on the ownership of
satisfactory to the general equivalent to the distributions on Class A Common Stock imposed under
partner, (4) the assignor and the Preferred OP Units tendered for AIMCO's charter and the transfer
assignee duly execute and acknowl- redemption and are part of a class restrictions and other limitations
edge such other instrument or or series of preferred stock that thereof, elect to cause AIMCO to
instruments as the general partner is then listed on the New York acquire some or all of the tendered
may deem necessary or desirable and Stock Exchange or another national Common OP Units in exchange for
(5) the assignee accepts, adopts securities exchange, or (iii) a Class A Common Stock, based on an
and approves in writing all of the number of shares of Class A Common exchange ratio of one share of
terms and provisions of your part- Stock of AIMCO that is equal in Class A Common Stock for each Com-
nership's agreement of limited Value to the Liquidation Preference mon OP Unit, subject to adjustment
partnership. of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 1831
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 1832
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 1833
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 1834
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
S-71
<PAGE> 1835
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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<PAGE> 1836
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS
CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
S-73
<PAGE> 1837
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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<PAGE> 1838
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
S-75
<PAGE> 1839
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee of up to 9% of Distributed
Cash From Operations received by the limited partners for its services as
general partner of your partnership and may receive reimbursement for expenses
incurred in such capacity. The general partner of your partnership received fees
and reimbursements totaling $403,000 in 1996, $374,000 in 1997 and $187,000 for
the first six months of 1998. The property manager received management fees of
$658,000 in 1996, $737,000 in 1997 and $384,000 for the first six months of
1998. The AIMCO Operating Partnership has no current intention of changing the
fee structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-76
<PAGE> 1840
YOUR PARTNERSHIP
GENERAL
Consolidated Capital Institutional Properties/3 was organized on May 23,
1984 under the laws of the State of California. Its primary business is real
estate ownership and related operations. Your partnership was formed for the
purpose of making investments in various types of real properties which offer
potential capital appreciation and cash distributions to its limited partners.
Your partnership's investment portfolio currently consists of (a) 1,661
apartment units in 8 properties located in Washington, Florida, Michigan, Utah,
North Carolina, and Colorado and (b) two commercial office buildings, with total
square feet of 277,000, in Florida and California. One of the properties, City
Heights Apartments, is under contract to be sold to an unaffiliated party in
November 1998. The general partner of your partnership is ConCap Equities, Inc.,
which is a majority-owned subsidiary of AIMCO. The executive officers and
directors of the general partner are the same as those of the AIMCO GP, which
are set forth in Appendix B hereto. A majority-owned subsidiary of AIMCO serves
as manager of the properties owned by your partnership. As of September 15,
1998, there were 91,557.20 units issued and outstanding, which were held of
record by 15,364 limited partners. Your partnership's principal executive
offices are located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado
80222, and its telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-K for the year ended December 31, 1997;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated July 25, 1986, by which units in your
partnership were originally offered, your partnership was formed for the purpose
of making loans to affiliated entities. The general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner would sell or
refinance their properties within a period less than twelve years of the
offering. In any event, according to the prospectus, the general partner
anticipated that a disposition of the properties would depend on, among other
things, the current real estate and money markets, economic climate and income
tax consequences to the limited partners. Under your partnership's agreement of
limited partnership, the term of the partnership will continue until December
31, 2015, unless sooner terminated as provided in the agreement or by law.
Limited partners could, as an alternative to tendering their units, take a
variety of possible actions, including voting to liquidate the partnership or
amending the agreement of limited partnership to authorize limited partners to
cause the partnership to merge with another entity or engage in a "roll-up" or
similar transaction.
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<PAGE> 1841
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, except in the case of negligence or
misconduct, the general partner and its affiliate or agents acting on their
behalf are not liable, responsible or accountable in damages or otherwise to
your partnership (in any action, including a partnership derivative suit) or to
any of the limited partners for the doing of any act or the failure to do any
act, the effect of which may cause or result in loss or damage to your
partnership, if done in good faith to promote the best interests of your
partnership. As a result, unitholders might have a more limited right of action
in certain circumstances than they would have in the absence of such a provision
in your partnership's agreement of limited partnership. The general partner of
your partnership is majority-owned by AIMCO. See "Conflicts of Interest".
The general partner and its affiliates or agents are entitled to
indemnification by your partnership from assets of your partnership, or as an
expense of your partnership, but not from the limited partners, against any
liability or loss, as a result of any claim or legal proceeding (whether or not
the same proceeds to judgment or is settled or otherwise brought to a
conclusion) relating to the performance or non-performance of any act concerning
the duties of your partnership except in the case where the general partner or
its affiliates or agents are guilty of bad faith, negligence, misconduct or
reckless disregard of duty, provided such act or omission was done in good faith
to promote the best interests of your partnership. The indemnification
authorized by your partnership's agreement of limited partnership includes the
payment of reasonable attorneys' fees and other expenses (not limited to taxable
costs) incurred in settling or defending any claims, threatened action or
finally adjudicated legal proceedings. Notwithstanding the foregoing, neither
the general partner nor any officer, director, employee, agent, subsidiary or
assign of the general partner or its affiliates are indemnified from any
liability, loss or damage incurred by them in connection with (1) any claim or
settlement involving allegations that the Securities Act of 1933 was violated by
the general partner or by any such other person or entity unless: (i) the
general partner or other persons or entities seeking indemnification are
successful in defending such action and (ii) such indemnification is
specifically approved by a court of law which is advised as to the current
position of both the Securities and Exchange Commission and the California
Commissioner of Corporations regarding indemnification for violations of
securities laws; or (2) any liability imposed by law, including liability for
fraud, bad faith or negligence.
Your partnership must at all times maintain public liability insurance in
amounts determined by the general partner for the protection of your partnership
and cash of its members.
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<PAGE> 1842
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $250.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 9.42
January 1, 1996 - December 31, 1996......................... 18.98
January 1, 1997 - December 31, 1997......................... 36.13
January 1, 1998 - June 30, 1998............................. --
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 25.1% interest in your partnership, including 39,761.5 units held by us and
the general partner of your partnership. Except as set forth above, neither the
AIMCO Operating Partnership, nor, to the best of its knowledge, any of its
affiliates, (i) beneficially own or have a right to acquire any units, (ii) have
effected any transactions in the units in the past 60 days, or (iii) have any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of your partnership, including, but not limited to,
contracts, arrangements, understandings or relationships concerning transfer or
voting thereof, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $282,000
1995........................................................ 429,000
1996........................................................ 403,000
1997........................................................ 374,000
1998 (through June 30)...................................... 187,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- --------
<S> <C>
1994........................................................ $260,000
1995........................................................ 572,000
1996........................................................ 658,000
1997........................................................ 737,000
1998 (through June 30)...................................... 384,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-79
<PAGE> 1843
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
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<PAGE> 1844
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Consolidated Capital Institutional
Properties/3 appearing in Consolidated Capital Institutional Properties/3 Annual
Report (Form 10-K) for the year ended December 31, 1997, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their Report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
S-81
<PAGE> 1845
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-K filed with
the Securities and Exchange Commission for the years ended December 31,
1995, 1996 and 1997, and quarterly report on Form 10-Q for the period
ending June 30, 1998, which the Partnership's management has indicated to
be the most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
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<PAGE> 1846
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1847
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 1848
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
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<PAGE> 1849
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1850
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
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<PAGE> 1851
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
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<PAGE> 1852
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
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<PAGE> 1853
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1854
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CONSOLIDATED CAPITAL PROPERTIES III
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF THE
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS IF
OFFER AND TO RENDER AN OPINION AS TO THE YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND THE
PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $91.00 per unit
and an affiliate estimated the net liquidation value of your units to be
$90.81 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire securities, the nature of your investment will change from
holding an interest in a few properties to holding an interest in our
large portfolio of properties. In the future, the properties owned by
your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1855
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Consolidated
Capital Properties III..................... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-54
Experience of Stanger........................ S-54
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-55
Conclusions.................................. S-56
Assumptions, Limitations and
Qualifications............................. S-56
Compensation and Material Relationships...... S-57
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-58
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-64
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
</TABLE>
i
<PAGE> 1856
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-77
Originally Anticipated Term of the
Partnership................................ S-77
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-78
Property Management.......................... S-78
[Fiduciary Responsibility of the General
Partner of Your Partnership]............... S-78
Distributions................................ S-79
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-79
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-80
LEGAL MATTERS.................................. S-81
EXPERTS........................................ S-81
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1857
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Consolidated Capital Properties III. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in ConCap Equities, Inc., the
managing general partner of your partnership (the "general partner"), and
the company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1858
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1859
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $13.69 per unit for the year ended
December 31, 1997 (equivalent to $ on an annual basis). We will pay fixed
quarterly distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of
Tax-Deferral Common OP Units. We pay quarterly distributions on the
Tax-Deferral Common OP Units based on our funds from operations for that
quarter. For the six months ended June 30, 1998, we paid distributions of
$1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25 on
an annual basis). This is equivalent to distributions of $ per year
on the number of Tax-Deferral % Preferred OP Units, or $ per year on
the number of Tax-Deferral Common OP Units, that you would receive in an
exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in four properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1860
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $13.50 per unit to $94.91 per unit
over the period from January 1, 1997 through September 30, 1998. As of June
30, 1998, your general partner estimated the net asset value of your units
to be $91.00 per unit and an affiliate of your general partner estimated
the net liquidation value of your units to be $90.81 per unit. However, we
do not believe that these valuations represent the current fair market
value of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 1861
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of 6
units (or 10 units if you reside in Missouri at the time you tender)
(except for units held by IRAs and Keogh Plans).
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
S-5
<PAGE> 1862
Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
S-6
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SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$91.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $90.81 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $13.50 per unit to $94.91 per
unit for the period from January 1, 1997 through September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
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deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages a few
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
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DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
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COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
25.2% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in significant amounts of
taxable income to you and your partners. Another option for liquidation of
your
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investment would be to sell your units in a private transaction. Any such
sale could be at a very substantial discount from your pro rata share of
the fair market value of your partnership's property and might involve
significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
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Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
S-15
<PAGE> 1872
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 1873
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $13.50 to $94.91
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 1874
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner. Also, your partnership is limited as to the number of limited partner
interests it may issue while the AIMCO Operating Partnership has no such
limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to a maximum of 9% of an amount equal to actual
distributions to limited partners of Distributed Cash From Operations for its
services as general partner and may receive reimbursement for expenses incurred
in such capacity. The general partner of your partnership received total fees
and reimbursements of $72,000 for the first six months of 1998. The property
manager received management fees of $95,000 for the first six months of 1998. We
have no current intention of changing the fee structure for your property
manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Consolidated Capital Properties III was organized on May 22, 1980, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed
S-18
<PAGE> 1875
for the purpose of making investments in various types of real properties
which offer potential capital appreciation and cash distributions to its limited
partners. Your partnership's investment portfolio currently consists of the
following three residential apartment complexes: Ventura Landing Apartments, a
184-unit complex in Orlando, Florida; Village Green Apartments, a 164-unit
complex in Altamonte Springs, Florida; and West Chase Apartments, a 120-unit
complex in Lexington, Kentucky. Additionally, your partnership's investment
portfolio contains Professional Plaza Office Building, a 79,000 square foot
office building in Salt Lake City, Utah. The general partner of your partnership
is ConCap Equities, Inc., which is a majority-owned subsidiary of AIMCO.
Insignia Financial Group, Inc., which is a majority-owned subsidiary of AIMCO,
serves as manager of the properties owned by your partnership. As of September
15, 1998, there were 158,582 units of limited partnership interest issued and
outstanding, which were held of record by 7,412 limited partners. Your
partnership's principal executive offices are located at 1873 South Bellaire
Street, 17th Floor, Denver, Colorado 80222, and its telephone number at that
address is (303) 757-8101. For additional information about your partnership,
please refer to the annual and quarterly reports prepared by your partnership
which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1876
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1877
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1878
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1879
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1880
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1881
SUMMARY FINANCIAL INFORMATION OF CONSOLIDATED CAPITAL PROPERTIES III
The summary financial information of Consolidated Capital Properties III
for the six months ended June 30, 1998 and 1997 is unaudited. The summary
financial information for Consolidated Capital Properties III for the years
ended December 31, 1997, 1996 and 1995 is based on audited financial statements.
This information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
CONSOLIDATED CAPITAL PROPERTIES III
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
--------------- ------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $1,937 $1,791 $3,740 $6,227 $4,683
Net Income(Loss)............................................ 386 255 491 1,693 (775)
Net income (Loss) per limited partnership unit.............. 2.34 1.54 2.97 17.20 (5.39)
Distributions per limited partnership unit.................. -- 6.96 13.69 2.30 18.58
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------- ------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $4,577 $4,565 $4,585 $4,620 $5,758
Total Assets................................................ 7,675 8,132 7,243 8,999 9,178
Notes Payable............................................... 4,200 4,200 4,200 4,200 6,718
Partners' Capital (Deficit)................................. 3,025 3,515 2,639 4,410 1,948
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CONSOLIDATED CAPITAL
PARTNERSHIP PROPERTIES III
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $0.00 $13.69
</TABLE>
S-25
<PAGE> 1882
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $13.50 per unit to
$94.91 per unit over the period from January 1, 1997 to September 30, 1998. As
of June 30, 1998, your general partner estimated the net asset value of your
units to be $91.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $90.81 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 1883
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 1884
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a few properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the year ended December 31, 1997
were $13.69 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
S-28
<PAGE> 1885
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service ("Moody's") revised its outlook for our ratings from stable to negative
to reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Financial Group,
Inc., which manages the properties owned by your partnership. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 25.2%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
S-29
<PAGE> 1886
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. In July 30, 1998, Cooper River Properties,
L.L.C., then an affiliate of Insignia and now our affiliate, commenced a tender
offer to acquire 75,000 units (representing approximately 47% of the number
outstanding) at a cash purchase price of $60 per unit.
Prior to such tender offer, Madison Partnership Liquidity Investors 64,
LLC, which was unaffiliated with Insignia and is not affiliated with AIMCO,
commenced a tender offer for $25.00 per unit.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your
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<PAGE> 1887
partnership. Given improving rental market conditions, the level of
distributions might increase over time. It is possible that the private resale
market for properties could improve over time, making a sale of the
partnership's property in a private transaction at some point in the future a
more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the
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<PAGE> 1888
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 1889
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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<PAGE> 1890
, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of 6 units (or 10 units if you reside in Missouri at the time
you tender) (except for units held by IRAs and Keogh Plans). No alternative,
conditional or contingent tenders will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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<PAGE> 1891
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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<PAGE> 1892
Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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<PAGE> 1893
Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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<PAGE> 1894
pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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<PAGE> 1895
partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 25,336 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 15.98% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
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pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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<PAGE> 1904
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Professional Plaza Office Building $ % $
Ventura Landing Apartments
Village Green Apartments
West Chase Apartments
</TABLE>
- - Second, we calculated the value of the equity of your partnership by adding to
the aggregate gross property value of all properties owned by your
partnership, the value of the non-real estate assets of your partnership, and
deducting the liabilities of your partnership, including mortgage debt and
debt owed by your partnership to its general partner or its affiliates after
consideration of any applicable subordination provisions affecting payment of
such debt. We deducted from this value any taxes and certain other costs
including required capital expenditures and deferred maintenance to derive a
net equity value for your partnership of $ .
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<PAGE> 1905
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
S-49
<PAGE> 1906
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Distributions with respect to your units for the year ended December
31, 1997 were $13.69 (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
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<PAGE> 1907
partner of your partnership and the AIMCO Operating Partnership believe
that the valuation method described in "Valuation of Units" provides a
meaningful indication of value for residential apartment properties although
there are other ways to value real estate. A liquidation in the future might
generate a higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-51
<PAGE> 1908
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $13.50 to $94.91
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 29,157.5 units (representing less than 18.39%
of the total outstanding units) was transferred in sale transactions. Set forth
in the table below are the high and low sales prices of units for the quarterly
periods from January 1, 1996 to September 30, 1998, as reported by the general
partner. The transfer paperwork submitted to the general partner often does not
include the requested price information or contains conflicting information as
to the actual sales price. Accordingly, you should not rely upon this
information as being completely accurate.
CONSOLIDATED CAPITAL PROPERTIES III
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER(A)
--------------------------
LOW SALES HIGH SALES
PRICE PRICE
PER UNIT PER UNIT
--------- ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter............................................. $13.50 $91.50
Second Quarter............................................ 17.67 61.49
First Quarter............................................. 17.67 83.33
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................................ 24.00 38.04
Third Quarter............................................. 20.20 94.91
Second Quarter............................................ 19.16 55.29
First Quarter............................................. 25.00 87.05
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................................ 15.05 52.00
Third Quarter............................................. 33.00 50.00
Second Quarter............................................ 25.00 57.00
First Quarter............................................. 24.75 62.43
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
S-52
<PAGE> 1909
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Village Green Apartments and Ventura Landing Apartments were
appraised in April 12, 1996, by an independent, third party appraiser, Joseph J.
Blake & Associates (the "Appraiser"), in connection with a refinancing of each
property. According to the appraisal reports, the scope of the appraisals
included an inspection of each property and an analysis of the surrounding
market. The Appraiser relied principally on the income capitalization approach
to valuation and secondarily on the sales comparison approach, and represented
that its report was prepared in accordance with the Code of Professional Ethics
and Standards of Professional Appraisal Practice of the Appraisal Institute and
the Uniform Standards of Professional Appraisal Practice, and in compliance with
the Appraisal Standards set forth in the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (known as "FIRREA"). The estimated market value of
the fee simple estate of the properties specified in those appraisal reports
were $4,000,000 and $3,900,000, respectively. A copy of the summaries of the
appraisals has been filed as an exhibit to the AIMCO Operating Partnership's
Tender Offer Statement on Schedule 14D-1 filed with the SEC. Independent
appraisals have not been conducted for any of the partnership's other properties
in the past three years.
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $91.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from
S-53
<PAGE> 1910
temporary investments, and all other assets that are believed to have
liquidation value, after provision in full for all of the other known
liabilities of your partnership. This net asset value does not take into account
(i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
S-54
<PAGE> 1911
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for similar properties; (viii)
reviewed internal financial analyses and forecasts prepared by your partnership
of the estimated current net liquidation value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; (x) reviewed
available trading information for the units; and (xi) conducted other studies,
analysis and inquiries as Stanger deemed appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improve-
S-55
<PAGE> 1912
ments, the terms of existing debt, encumbering your partnership's
properties, and expectations of management regarding operating results of your
partnership's properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders;
S-56
<PAGE> 1913
(e) the relative value of the cash, Preferred OP Units or Common OP Units
to be issued in connection with the offer; and (f) any adjustments made to
determine the offer consideration and the net amounts distributable to the
unitholders, including but not limited to, balance sheet adjustments to reflect
your partnership's estimate of the value of current net working capital
balances, reserve accounts, and liabilities, and adjustments to the offer
consideration for distributions made by your partnership subsequent to the date
of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-57
<PAGE> 1914
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
<TABLE>
<CAPTION>
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Distributable Cash From Operations (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2010. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire, own, The purpose of the AIMCO Operating Partnership is to
improve, maintain, operate, lease, sell, dispose of, conduct any business that may be lawfully conducted by
finance and otherwise deal with your partnership's a limited partnership organized pursuant to the
property. Your partnership's objectives are to (1) Delaware Revised Uniform Limited Partnership Act (as
preserve and protect the limited partners' invested amended from time to time, or any successor to such
capital by investing, either alone or in association statute) (the "Delaware Limited Partnership Act"),
with others, in a diversified portfolio of provided that such business is to be conducted in a
income-producing properties, (2) provide gains through manner that permits AIMCO to be qualified as a REIT,
potential appreciation of the properties, and (3) build unless AIMCO ceases to qualify as a REIT. The AIMCO
equity through reduction of mortgage loans. Subject to Operating Partnership is authorized to perform any and
restrictions contained in your partnership's agreement all acts for the furtherance of the purposes and
of limited partnership, your partnership may perform business of the AIMCO Operating Partnership, provided
all acts necessary, advisable or convenient to the that the AIMCO Operating Partnership may not take, or
business of your partnership including borrowing money refrain from taking, any action which, in the judgment
and creating liens. of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
S-58
<PAGE> 1915
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 240,200 units for time to the limited partners and to other persons, and
cash and notes to selected persons who fulfill the to admit such other persons as additional limited
requirements set forth in your partnership's agreement partners, on terms and conditions and for such capital
of limited partnership. The capital contribution need contributions as may be established by the general
not be equal for all limited partners and no action or partner in its sole discretion. The net capital
consent is required in connection with the admission of contribution need not be equal for all OP Unitholders.
any additional limited partners. The general partner No action or consent by the OP Unitholders is required
may not acquire properties in exchange for units. in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, the general partner and its affiliates may funds or other assets to its subsidiaries or other
acquire units from time to time on their own behalf and persons in which it has an equity investment, and such
for their own benefit, provided that such right does persons may borrow funds from the AIMCO Operating
not create any preferences in rights or benefits in Partnership, on terms and conditions established in the
favor of such persons or permit them to buy units other sole and absolute discretion of the general partner. To
than at the same cash price and on the same terms as the extent consistent with the business purpose of the
are available to other non-affiliated limited partners. AIMCO Operating Partnership and the permitted
Your partnership may not make any loans to the general activities of the general partner, the AIMCO Operating
partner but the general partner may lend money to your Partnership may transfer assets to joint ventures,
partnership on terms, as to interest rates and other limited liability companies, partnerships,
finance charges and fees, not in excess of amount that corporations, business trusts or other business
are charged by unrelated banks on comparable loans for entities in which it is or thereby becomes a
the same purpose, and, if a property is involved, in participant upon such terms and subject to such
the locality of the property. No prepayment charge or conditions consistent with the AIMCO Operating Part-
penalty will be required by the general partner on a nership Agreement and applicable law as the general
loan to your partnership. To the extent the general partner, in its sole and absolute discretion, believes
partner lends proceeds to your partnership, on an to be advisable. Except as expressly permitted by the
unsecured basis, such amounts will bear interest at an AIMCO Operating Partnership Agreement, neither the
amount not to exceed the lesser of the actual cost to general partner nor any of its affiliates may sell,
the general partner or the most recent prime rate of transfer or convey any property to the AIMCO Operating
interest charged by Bank of America, N.A., San Partnership, directly or indirectly, except pursuant to
Francisco main office, in effect on the date such loan transactions that are determined by the general partner
if first created. The general partner may not grant in good faith to be fair and reasonable.
exclusive right to sell or exclusive employment to sell
property for your partnership to itself. Your
partnership may not obtain long-term financing from the
general partner, except that it may issue an
"all-inclusive" or "wraparound" note if certain
conditions are satisfied. The general partner may not
cause your partnership to enter into any agreements
with the general partner or its affiliates which are
not subject to termination without penalty by either
party upon not more than sixty days' written notice.
Your partnership may not purchase or lease property in
which the general partner has an interest and may not
acquire property from any party in whom the general
partner has an interest. Notwithstanding the foregoing
and according to the terms of your partnership's
agreement of limited partnership, the general partner
may purchase property in its own name and temporarily
hold title thereto for the purpose of facilitating the
acquisition of such property or the borrowing of money
or obtaining of financing for your partnership, or the
completion of construction of the property, or any
other purpose related to the
</TABLE>
S-59
<PAGE> 1916
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
business of your partnership, provided that such
property is purchased by your partnership for a price
no greater than the cost of such property to the
general partner and provided there is no difference in
interest rates of the loans secured by the property at
the time acquired by the general partner and at the
time acquired by your partnership, nor any other
benefit to the general partner arising out of such
transaction apart from compensation otherwise permitted
by your partnership's agreement of limited partnership.
Your partnership may not sell or lease property to the
general partner.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to obligate and bind your partnership and to take such restrictions on borrowings, and the general partner has
action as the general partner deems necessary or full power and authority to borrow money on behalf of
advisable, including, without limitation, making, the AIMCO Operating Partnership. The AIMCO Operating
executing and delivering loan agreements, mortgages, Partnership has credit agreements that restrict, among
security agreements, promissory notes, documents other things, its ability to incur indebtedness. See
related to mortgage-backed securities, and other "Risk Factors -- Risks of Significant Indebtedness" in
documents as provided for in your partnership's the accompanying Prospectus.
agreement of limited partnership. The total
indebtedness of your partnership may not exceed 80% of
the purchase price of all properties on a combined
basis. The general partner will use its best efforts to
obtain level payment financing on the most favorable
terms available to your partnership and will use its
best efforts on any first mortgage financing incurred
in connection with property purchases, where a
provision for a balloon payment is provided, to
additionally provide: (1) that such balloon payment
will not be due and payable prior to fifteen years from
the acquisition date of the property and (2) that such
loan will have regular payments in an amount which
would be sufficient to self-liquidate the loan over a
20- to 30-year period. Secondary financing, if any,
will be fully amortizing or, if not fully amortizing,
will not be due and payable during the expected holding
period of the property. The foregoing restrictions do
not apply with respect to any existing original
financing, secondary financing in an amount equal to
less than 10% of the purchase price of a property. Your
partnership may not incur any non-recourse indebtedness
wherein the lender will have or acquire, at any time as
a result of making the loan any direct or indirect
interest in the profits, capital or property of your
partnership other than as a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner, upon reasonable request, to with a statement of the purpose of such demand and at
inspect and copy during normal business hours the such OP Unitholder's own expense, to obtain a current
register kept by your partnership which lists the list of the name and last known business, residence or
names, addresses and business telephone numbers of all mailing address of the general partner and each other
limited partners and the number of units owned by each OP Unitholder.
limited partner. Upon request of a limited partner, the
general partner will promptly mail to such limited
partner a copy of the investor list. If the general
partner neglects or refuses to mail a copy of the
investor list as requested, the general partner may be
liable to the limited partner requesting the list for
the cost incurred by the limited partner in compelling
the production of the list and for actual damages
incurred by the limited partner.
</TABLE>
S-60
<PAGE> 1917
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership. Subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership, the right to vote on certain matters described under
the general partner, on behalf of your partnership, may "Comparison of Ownership of Your Units and AIMCO OP
take any action it deems necessary or advisable in Units -- Voting Rights" below. The general partner may
connection with the business of your partnership not be removed by the OP Unitholders with or without
without the consent of the limited partners. No limited cause.
partner has any authority or right to act for or bind
your partnership or participate in or have any control In addition to the powers granted a general partner of
over your partnership business except as required by a limited partnership under applicable law or that are
law. granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, except in the case of negligence or the AIMCO Operating Partnership Agreement, the general
misconduct, the general partner and its affiliate or partner is not liable to the AIMCO Operating
agents acting on their behalf are not liable, responsi- Partnership for losses sustained, liabilities incurred
ble or accountable in damages or otherwise to your or benefits not derived as a result of errors in
partnership (in any action, including a partnership judgment or mistakes of fact or law of any act or
derivative suit) or to any of the limited partners for omission if the general partner acted in good faith.
the doing of any act or the failure to do any act, the The AIMCO Operating Partnership Agreement provides for
effect of which may cause or result in loss or damage indemnification of AIMCO, or any director or officer of
to your partnership, if done in good faith to promote AIMCO (in its capacity as the previous general partner
the best interests of your partnership. The general of the AIMCO Operating Partnership), the general
partner and its affiliates or agents are entitled to be partner, any officer or director of general partner or
indemnified by your partnership from assets of your the AIMCO Operating Partnership and such other persons
partnership, or as an expense of your partnership, but as the general partner may designate from and against
not from the limited partners, against any liability or all losses, claims, damages, liabilities, joint or
loss, as a result of any claim or legal proceeding several, expenses (including legal fees), fines,
(whether or not the same proceeds to judgment or is settlements and other amounts incurred in connection
settled or otherwise brought to conclusion) relating to with any actions relating to the operations of the
the performance or non-performance of any act AIMCO Operating Partnership, as set forth in the AIMCO
concerning the activities of your partnership except in Operating Partnership Agreement. The Delaware Limited
the case where the general partner or its affiliates or Partnership Act provides that subject to the standards
agents are guilty of bad faith, negligence, misconduct and restrictions, if any, set forth in its partnership
or reckless disregard of duty, provided such act or agreement, a limited partnership may, and shall have
omission was done in good faith to promote the best the power to, indemnify and hold harmless any partner
interests of your partnership. The indemnification or other person from and against any and all claims and
authorized by your partnership's agreement of limited demands whatsoever. It is the position of the
partnership includes the payment of reasonable Securities and Exchange Commission that indemnification
attorneys' fees and other expenses (not limited to of directors and officers for liabilities arising under
taxable costs) incurred in settling or defending any the Securities Act is against public policy and is
claims, threatened action or finally adjudicated legal unenforceable pursuant to Section 14 of the Securities
proceedings. Notwithstanding the forgoing, neither the Act of 1933.
general partner nor any officer, director, employee,
agent, subsidiary or assign of the general partner or
its affiliates are indemnified from any liability, loss
or damage incurred by them in connection
</TABLE>
S-61
<PAGE> 1918
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
with (i) any claim or settlement involving allegations
that the Securities Act of 1933 was violated by the
general partner or by any such other person or entity
unless: (1) the general partner or other persons or
entities seeking indemnification are successful in
defending such action and (ii) such indemnification is
specifically approved by a court of law which is
advised as to the current position of both the
Securities and Exchange Commission and the California
Commissioner of Corporation regarding indemnification
for violations of securities laws; or (2) any liability
imposed by law, including liability for fraud, bad
faith or negligence.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove or elect a has exclusive management power over the business and
general partner upon a vote of the limited partners affairs of the AIMCO Operating Partnership. The general
owning a majority of the outstanding units. No limited partner may not be removed as general partner of the
partner may substitute a transferee of his units in AIMCO Operating Partnership by the OP Unitholders with
such limited partner's place without the consent of the or without cause. Under the AIMCO Operating Partnership
general partner which may be withheld at the sole Agreement, the general partner may, in its sole
discretion of the general partner. discretion, prevent a transferee of an OP Unit from
becoming a substituted limited partner pursuant to the
AIMCO Operating Partnership Agreement. The general
partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners to add to the representations, the general partner may, without the consent of the OP
duties, or obligations of the general partner or its Unitholders, amend the AIMCO Operating Partnership
affiliates or to surrender any rights or powers granted Agreement, amendments to the AIMCO Operating
to the general partner or its affiliates for the Partnership Agreement require the consent of the
benefit of the limited partners, to comply with federal holders of a majority of the outstanding Common OP
and state securities laws and to cure any ambiguities. Units, excluding AIMCO and certain other limited
Other amendments to your partnership's agreement of exclusions (a "Majority in Interest"). Amendments to
limited partnership must be approved by the limited the AIMCO Operating Partnership Agreement may be
partners owning more than 50% of the units. However, proposed by the general partner or by holders of a
the limited partners may not amend your partnership's Majority in Interest. Following such proposal, the
agreement of limited partnership (1) to extend your general partner will submit any proposed amendment to
partnership term or (2) to alter the rights of the the OP Unitholders. The general partner will seek the
general partner to receive compensation, return of written consent of the OP Unitholders on the proposed
invested capital, allocations, and distributions, amendment or will call a meeting to vote thereon. See
without the consent of the general partner. Also, a "Description of OP Units -- Amendment of the AIMCO
unanimous vote of the limited partners is required to Operating Partnership Agreement" in the accompanying
amend the provision in your partnership's agreement of Prospectus.
limited partnership dealing with substituted limited
partners.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
The general partner of your partnership receives an The general partner does not receive compensation for
annual management fee equal to a maximum of 9% of an its services as general partner of the AIMCO Operating
amount equal to actual distributions to limited Partnership. However, the general partner is entitled
partners of Distributed Cash From Operations for its to payments, allocations and distributions in its
services as general partner and may receive capacity as general partner of the AIMCO Operating
reimbursement for expenses incurred in such capacity. Partnership. In addition, the AIMCO Operating Part-
The general partner received a total of $72,000 in nership is responsible for all expenses incurred
partnership management fees and reimbursements for the relating to the AIMCO Operating Partnership's ownership
first six months of 1998. of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
S-62
<PAGE> 1919
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Liability of Investors
<TABLE>
<S> <C>
Under California law, a limited partner is not bound by Except for fraud, willful misconduct or gross
the obligations of your partnership. A limited partner negligence, no OP Unitholder has personal liability for
is liable only to make payments of his capital the AIMCO Operating Partnership's debts and
contribution when due under your partnership's obligations, and liability of the OP Unitholders for
agreement of limited partnership. After its capital the AIMCO Operating Partnership's debts and obligations
contribution is fully paid, no limited partner will, is generally limited to the amount of their invest-
except as otherwise required by applicable law, be ment in the AIMCO Operating Partnership. However, the
required to make any further capital contributions or limitations on the liability of limited partners for
lend any funds to your partnership. the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner must diligently and partnership agreement, Delaware law generally requires
faithfully devote as much of its time, but is not a general partner of a Delaware limited partnership to
required to devote its full time, to the business of adhere to fiduciary duty standards under which it owes
your partnership and must at all times act in a its limited partners the highest duties of good faith,
fiduciary manner toward your partnership and the fairness and loyalty and which generally prohibit such
limited partners. The general partner at all times has general partner from taking any action or engaging in
a fiduciary responsibility for the safekeeping and use any transaction as to which it has a conflict of
of all partnership funds and assets. The general interest. The AIMCO Operating Partnership Agreement
partner may assign some of its general partner expressly authorizes the general partner to enter into,
functions to an affiliate; provided, however, that, on behalf of the AIMCO Operating Partnership, a right
notwithstanding any such assignment, the general of first opportunity arrangement and other conflict
partner will retain full responsibility to your avoidance agreements with various affiliates of the
partnership for the satisfactory performance of all AIMCO Operating Partnership and the general partner, on
partnership general partner duties. The general partner such terms as the general partner, in its sole and
may not commingle funds of your partnership with any absolute discretion, believes are advisable. The AIMCO
other person. Subject to its fiduciary duties, general Operating Partnership Agreement expressly limits the
partner and its affiliates may engage in whatever liability of the general partner by providing that the
activities they chose, whether the same are competitive general partner, and its officers and directors will
with your partnership or otherwise, without having or not be liable or accountable in damages to the AIMCO
incurring any obligation to offer any interest in such Operating Partnership, the limited partners or
activities to your partnership or any party hereto. The assignees for errors in judgment or mistakes of fact or
obligations of the parties are, therefore, limited law or of any act or omission if the general partner or
solely to those arising from the acquisition and such director or officer acted in good faith. See
holding of your partnership's properties. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and
</TABLE>
S-63
<PAGE> 1920
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
loss from the AIMCO Operating Partnership can only be
offset against other income and loss from the AIMCO
Operating Partnership). Income of the AIMCO Operating
Partnership, however, attributable to dividends from
the Management Subsidiaries (as defined below) or
interest paid by the Management Subsidiaries does not
qualify as passive activity income and cannot be offset
against losses from "passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove or elect a Prospectus. So long as any institution of bankruptcy
general partner; and approve other Preferred OP Units are outstand- proceedings, an assignment for the
matters as otherwise provided in ing, in addition to any other vote benefit of creditors and certain
your partnership's agreement of or consent of partners required by transfers by the general partner of
limited partnership. Unless prior law or by the AIMCO Operating its interest in the AIMCO Operating
consent Partnership Agree- Part-
</TABLE>
S-64
<PAGE> 1921
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
of the limited partners holding a ment, the affirmative vote or nership or the admission of a
majority of the units of your consent of holders of at least 50% successor general partner.
partnership is obtained, the of the outstanding Preferred OP
general partner is prohibited from Units will be necessary for Under the AIMCO Operating Partner-
(1) selling substantially all of effecting any amendment of any of ship Agreement, the general partner
your partnership's assets in a the provisions of the Partnership has the power to effect the
single sale or in multiple sales in Unit Designation of the Preferred acquisition, sale, transfer,
the same 12-month period, except in OP Units that materially and exchange or other disposition of
the orderly liquidation and winding adversely affects the rights or any assets of the AIMCO Operating
up of the business, (2) pledging preferences of the holders of the Partnership (including, but not
the credit of your partnership in Preferred OP Units. The creation or limited to, the exercise or grant
any way except in the ordinary issuance of any class or series of of any conversion, option,
course of business, (3) executing partnership units, including, privilege or subscription right or
or delivering any assignment for without limitation, any partner- any other right available in
the benefit of the creditors of ship units that may have rights connection with any assets at any
your partnership, and (4) senior or superior to the Preferred time held by the AIMCO Operating
releasing, assigning or OP Units, shall not be deemed to Partnership) or the merger,
transferring a partnership claim, materially adversely affect the consolidation, reorganization or
security, commodity or any other rights or preferences of the other combination of the AIMCO
asset in your partnership without holders of Preferred OP Units. With Operating Partnership with or into
full and adequate consideration. respect to the exercise of the another entity, all without the
above described voting rights, each consent of the OP Unitholders.
A general partner may cause the Preferred OP Units shall have one
dissolution of your partnership by (1) vote per Preferred OP Unit. The general partner may cause the
retiring. Your partnership may be dissolution of the AIMCO Operating
continued by the remaining general Partnership by an "event of
partner or, if none, the limited withdrawal," as defined in the
partners may agree to continue your Delaware Limited Partnership Act
partnership by electing a successor (including, without limitation,
general partner upon the vote of bankruptcy), unless, within 90 days
holders of more than 50% of the after the withdrawal, holders of a
units within 60 days after the "majority in interest," as defined
retirement of the general partner. in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Distributable Cash $ per Preferred OP Unit; tribute quarterly all, or such
From Operations are to be made provided, however, that at any time portion as the general partner may
quarterly during the fiscal year and from time to time on or after in its sole and absolute discretion
after the minimum units are sold. the fifth anniversary of the issue determine, of Available Cash (as
The distributions payable to the date of the Preferred OP Units, the defined in the AIMCO Operating
partners are not fixed in amount AIMCO Operating Partnership may Partnership Agreement) generated by
and depend upon the operating adjust the annual distribution rate the AIMCO Operating Partnership
results and net sales or refi- on the Preferred OP Units to the during such quarter to the general
nancing proceeds available from the lower of (i) % plus the annual partner, the special limited
disposition of your partnership's interest rate then applicable to partner and the holders of Common
assets. U.S. Treasury notes with a maturity OP Units on the record date
of five years, and (ii) the annual established by the general partner
dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
Holders of any other Pre-
</TABLE>
S-65
<PAGE> 1922
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
lative Preferred Stock. Such ferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may not sell, There is no public market for the There is no public market for the
transfer, encumber or otherwise Preferred OP Units and the OP Units. The AIMCO Operating Part-
dispose by operation of law or Preferred OP Units are not listed nership Agreement restricts the
otherwise of the whole or any part on any securities exchange. The transferability of the OP Units.
of his interest in your partnership Preferred OP Units are subject to Until the expiration of one year
except by written instrument restrictions on transfer as set from the date on which an OP
satisfactory in form to the general forth in the AIMCO Operating Unitholder acquired OP Units,
partner, accompanied by the Partnership Agreement. subject to certain exceptions, such
assurance of the genuineness and OP Unitholder may not transfer all
effectiveness of each such Pursuant to the AIMCO Operating or any portion of its OP Units to
signature and the obtaining of any Partnership Agreement, until the any transferee without the consent
federal and/or state governmental expiration of one year from the of the general partner, which
approval, if any, as may be date on which a holder of Preferred consent may be withheld in its sole
reasonably required by the general OP Units acquired Preferred OP and absolute discretion. After the
partner. A minimum of six units may Units, subject to certain expiration of one year, such OP
be transferred, other than for exceptions, such holder of Unitholder has the right to
transferors who reside in Missouri Preferred OP Units may not transfer transfer all or any portion of its
at the time of transfer who will be all or any portion of its Pre- OP Units to any person, subject to
required to transfer a minimum of ferred OP Units to any transferee the satisfaction of certain
ten units, except for transfers by without the consent of the general conditions specified in the AIMCO
gift or inheritance, intrafamily partner, which consent may be Operating Partnership Agreement,
transfers, family dissolutions and withheld in its sole and absolute including the general partner's
transfers to affiliates. No discretion. After the expiration of right of first refusal. See
assignment is valid or effective one year, such holders of Preferred "Description of OP Units --
unless in compliance with the OP Units has the right to transfer Transfers and Withdrawals" in the
conditions contained herein. No all or any portion of its Preferred accompanying Prospectus.
partner may make any assignment of OP Units to any person, subject to
all or any part of his the satisfaction of
</TABLE>
S-66
<PAGE> 1923
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
interest if said transfer of certain conditions specified in the After the first anniversary of
assignment would, when considered AIMCO Operating Partnership Agree- becoming a holder of Common OP
with all other transfers made ment, including the general Units, an OP Unitholder has the
during the same applicable 12-month partner's right of first refusal. right, subject to the terms and
period, cause a termination of your conditions of the AIMCO Operating
partnership for federal or any After a one-year holding period, a Partnership Agreement, to require
applicable state income tax holder may redeem Preferred OP the AIMCO Operating Partnership to
purposes. Such transferee may be Units and receive in exchange redeem all or a portion of the
substituted as a limited partner therefor, at the AIMCO Operating Common OP Units held by such party
if, in addition to the above re- Partnership's option, (i) subject in exchange for a cash amount based
quirements: (1) the assignor to the terms of any Senior Units, on the value of shares of Class A
designates such intention in the cash in an amount equal to the Common Stock. See "Description of
instrument of assignment, (2) the Liquidation Preference of the OP Units -- Redemption Rights" in
written consent of the general Preferred OP Units tendered for the accompanying Prospectus. Upon
partner is obtained, the granting redemption, (ii) a number of shares receipt of a notice of redemption,
of which is in the general of Class I Cumulative Preferred the AIMCO Operating Partnership
partner's sole discretion, (3) the Stock of AIMCO that pay an may, in its sole and absolute
assignment instrument is in form aggregate amount of dividends yield discretion but subject to the
and substance satisfactory to the equivalent to the distributions on restrictions on the ownership of
general partner, (4) the assignor the Preferred OP Units tendered for Class A Common Stock imposed under
and assignee duly execute and redemption and are part of a class AIMCO's charter and the transfer
acknowledge such other instrument or series of preferred stock that restrictions and other limitations
or instruments as the general is then listed on the New York thereof, elect to cause AIMCO to
partner may deem necessary or Stock Exchange or another national acquire some or all of the tendered
desirable and (5) the assignee securities exchange, or (iii) a Common OP Units in exchange for
accepts, adopts and approves in number of shares of Class A Common Class A Common Stock, based on an
writing all of the terms and Stock of AIMCO that is equal in exchange ratio of one share of
provisions of your partnership's Value to the Liquidation Preference Class A Common Stock for each Com-
agreement of limited partnership. of the Preferred OP Units tendered mon OP Unit, subject to adjustment
for redemption. The Preferred OP as provided in the AIMCO Operating
Units may not be redeemed at the Partnership Agreement.
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
S-67
<PAGE> 1924
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
S-68
<PAGE> 1925
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
S-69
<PAGE> 1926
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 1927
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
S-71
<PAGE> 1928
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
S-72
<PAGE> 1929
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS
CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
S-73
<PAGE> 1930
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
S-74
<PAGE> 1931
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
S-75
<PAGE> 1932
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
We have a majority ownership interest in both the general partner of your
partnership and the manager of your partnership's property. The general partner
of your partnership receives an annual management fee equal to a maximum of 9%
of an amount equal to actual distributions to limited partners of Distributed
Cash From Operations (as defined in your partnership's agreement of limited
partnership) for its services as general partner and may receive reimbursement
for expenses incurred in such capacity. The general partner received fees and
reimbursements totaling $237,000 in 1996, $191,000 in 1997 and $72,000 for the
first six months of 1998. The property manager received management fees of
$207,000 in 1996, $181,000 in 1997 and $95,000 for the first six months of 1998.
The AIMCO Operating Partnership has no current intention of changing the fee
structure for the manager of your partnership property.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
S-76
<PAGE> 1933
YOUR PARTNERSHIP
GENERAL
Consolidated Capital Properties III was organized on May 22, 1980, under
the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of the following three
residential apartment complexes: Ventura Landing Apartments, a 184-unit complex
in Orlando, Florida; Village Green Apartments, a 164-unit complex in Altamonte
Springs, Florida; and West Chase Apartments, a 120-unit complex in Lexington,
Kentucky. Additionally, your partnership's investment portfolio contains
Professional Plaza Office Building, a 79,000 square foot office building in Salt
Lake City, Utah. The general partner of your partnership is ConCap Equities,
Inc., which is a majority-owned subsidiary of AIMCO. Insignia Financial Group,
Inc., which is a majority-owned subsidiary of AIMCO, serves as manager of the
properties owned by your partnership. As of September 15, 1998, there were
158,582 units of limited partnership interest issued and outstanding, which were
held of record by 7,412 limited partners. Your partnership's principal executive
offices are located at 1873 South Bellaire Street, 17th Floor, Denver, Colorado
80222, and its telephone number at that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-KSB, for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB, for the quarters ended March 31, 1998
and June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
ORIGINALLY ANTICIPATED TERM OF THE PARTNERSHIP
According to the prospectus dated December 15, 1983, by which units in your
partnership were originally offered, the general partner of your partnership
(which at the time was not affiliated with AIMCO) indicated that prior
partnerships sponsored by affiliates of the general partner would, on average,
begin selling their properties during the third year after the investments were
made and sell all of their properties after seven years of ownership. The
prospectus further stated, however, that the general partner was unable to
predict how long the partnership would remain invested in the properties and
that the partnership acquired such properties for investment rather than resale.
In any event, according to the prospectus, the general partner anticipated that
a disposition of the properties would depend on, among other things, the current
real estate and money markets, economic climate and income tax consequences to
the limited partners. Under your partnership's agreement of limited partnership,
the term of the partnership will continue until December 31, 2010, unless sooner
terminated as provided in the agreement or by law. Limited partners could, as an
alternative to tendering their units, take a variety of possible actions,
including voting to liquidate the partnership or amending the agreement of
limited partnership to authorize limited partners to cause the partnership to
merge with another entity or engage in a "roll-up" or similar transaction.
S-77
<PAGE> 1934
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. Based on the above considerations, the general partner has determined
that it is not in the best interests of limited partners to sell or refinance
any property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, except in the case of negligence or
misconduct, the general partner and its affiliate or agents acting on their
behalf are not liable, responsible or accountable in damages or otherwise to
your partnership (in any action, including a partnership derivative suit) or to
any of the limited partners for the doing of any act or the failure to do any
act, the effect of which may cause or result in loss or damage to your
partnership, if done in good faith to promote the best interests of your
partnership. As a result, unitholders might have a more limited right of action
in certain circumstances than they would have in the absence of such a provision
in your partnership's agreement of limited partnership. The general partner of
your partnership is majority-owned by AIMCO. See "Conflicts of Interest".
The general partner and its affiliates or agents are entitled to
indemnification by your partnership from assets of your partnership, or as an
expense of your partnership, but not from the limited partners, against any
liability or loss, as a result of any claim or legal proceeding (whether or not
the same proceeds to judgment or is settled or otherwise brought to a
conclusion) relating to the performance or non-performance of any act concerning
the activities of your partnership except in the case where the general partner
or its affiliates or agents are guilty of bad faith, negligence, misconduct or
reckless disregard of duty, provided such act or omission was done in good faith
to promote the best interests of your partnership. The indemnification
authorized by your partnership's agreement of limited partnership includes the
payment of reasonable attorneys' fees and other expenses (not limited to taxable
costs) incurred in settling or defending any claims, threatened action or
finally adjudicated legal proceedings. Notwithstanding the foregoing, neither
the general partner nor any officer, director, employee, agent, subsidiary or
assign of the general partner or its affiliates are indemnified from any
liability, loss or damage incurred by them in connection with (1) any claim or
settlement involving allegations that the Securities Act of 1933 was violated by
the general partner or by any such other person or entity unless: (i) the
general partner or other persons or entities seeking indemnification are
successful in defending such action and (ii) such indemnification is
specifically approved by a court of law which is advised as to the current
position of both the Securities and Exchange Commission and the California
Commissioner of Corporations regarding indemnification for violations of
securities laws; or (2) any liability imposed by law, including liability for
fraud, bad faith or negligence.
Your partnership must at all times maintain public liability insurance in
amounts determined by the general partner for the protection of your partnership
and cash of its members.
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<PAGE> 1935
DISTRIBUTIONS
Your partnership's agreement of limited partnership specifies how the cash
available for distribution, whether arising from operations or sales or
refinancing, is to be shared among the partners. Distributions of Distributable
Cash From Operations are to be made quarterly during the fiscal year after the
minimum units are sold. The distributions payable to the partners are not fixed
in amount and depend upon the operating results and net sales or refinancing
proceeds available from the disposition of your partnership's assets. Your
partnership has made distributions in the past and is projected to make
distributions in 1998. The following table sets forth the distributions paid per
unit in the periods indicated below. The original cost per unit was $500.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $18.58
January 1, 1996 - December 31, 1996......................... 2.30
January 1, 1997 - December 31, 1997......................... 13.69
January 1, 1998 - June 30, 1998............................. 0.00
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 25.2% interest in your partnership, including 39,761.5 units held by us and
the interest of Concap Equities, Inc., as a general partner of your partnership.
Except as set forth above, neither the AIMCO Operating Partnership, nor, to the
best of its knowledge, any of its affiliates, (i) beneficially own or have a
right to acquire any units, (ii) have effected any transactions in the units in
the past 60 days, or (iii) have any contract, arrangement, understanding or
relationship with any other person with respect to any securities of your
partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning transfer or voting thereof, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $232,000
1995........................................................ 279,000
1996........................................................ 237,000
1997........................................................ 191,000
1998 (through June 30)...................................... 72,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----
<S> <C>
1994........................................................ $220,000
1995........................................................ 172,000
1996........................................................ 207,000
1997........................................................ 181,000
1998 (through June 30)...................................... 95,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-79
<PAGE> 1936
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-80
<PAGE> 1937
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Consolidated Capital Properties
III appearing in Consolidated Capital Properties III Annual Report (Form 10-KSB)
for the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
S-81
<PAGE> 1938
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-KSB filed with
the Securities and Exchange Commission for the years ended December 31,
1996 and 1997, and quarterly report on Form 10-QSB for the period ending
June 30, 1998, which the Partnership's management has indicated to be the
most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
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<PAGE> 1939
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 1940
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
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<PAGE> 1941
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO are set forth below. The
two directors of AIMCO-GP and the general partner of your partnership are Terry
Considine and Peter Kompaniez. Unless otherwise indicated, the business address
of each executive officer and director is 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222. Each executive officer and director is a citizen
of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
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<PAGE> 1942
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 1943
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 1944
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 1945
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 1946
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 1947
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CONSOLIDATED CAPITAL PROPERTIES IV
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in a small number of properties apartment
properties to holding an interest in our large portfolio of properties.
In the future, the properties owned by your partnership may outperform
our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 1948
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-15
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-17
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Consolidated
Capital Properties IV...................... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-50
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-50
Fairness to Unitholders who Tender their
Units...................................... S-51
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-53
STANGER ANALYSIS............................... S-54
Experience of Stanger........................ S-54
Summary of Materials Considered.............. S-54
Summary of Reviews........................... S-55
Conclusions.................................. S-56
Assumptions, Limitations and
Qualifications............................. S-56
Compensation and Material Relationships...... S-57
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-58
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-64
DESCRIPTION OF PREFERRED OP UNITS.............. S-68
General...................................... S-68
Ranking...................................... S-68
Distributions................................ S-68
Allocation................................... S-69
Liquidation Preference....................... S-69
Redemption................................... S-70
Voting Rights................................ S-70
Restrictions on Transfer..................... S-70
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-71
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-73
CONFLICTS OF INTEREST.......................... S-76
Conflicts of Interest with Respect to the
Offer...................................... S-76
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-76
Competition Among Properties................. S-76
Features Discouraging Potential Takeovers.... S-76
Future Exchange Offers....................... S-76
YOUR PARTNERSHIP............................... S-77
General...................................... S-77
</TABLE>
i
<PAGE> 1949
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information Concerning Your
Partnership................................ S-77
Term of the Partnership...................... S-77
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-77
Property Management.......................... S-78
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-78
Distributions................................ S-79
Beneficial Ownership of Interests in Your
Partnership................................ S-79
Compensation Paid to the General Partner and
its Affiliates............................. S-79
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-80
LEGAL MATTERS.................................. S-81
EXPERTS........................................ S-81
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 1950
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Consolidated Capital Properties IV. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in ConCap Equities, Inc., the
managing general partner of your partnership (the "general partner"), and
the company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 1951
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 1952
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership paid distributions of $6.41 per unit for the six months
ended June 30, 1998 (equivalent to $ on an annual basis). We will pay
fixed quarterly distributions of $ per unit on the
Tax-Deferral % Preferred OP Units before any distributions are paid to
holders of Tax-Deferral Common OP Units. We pay quarterly distributions on
the Tax-Deferral Common OP Units based on our funds from operations for
that quarter. For the six months ended June 30, 1998, we paid distributions
of $1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25
on an annual basis). This is equivalent to distributions of $ per
year on the number of Tax-Deferral % Preferred OP Units, or $ per
year on the number of Tax-Deferral Common OP Units, that you would receive
in an exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in a few properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 1953
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $10.00 per unit to $152.60 per unit
from January 1, 1997 to September 30, 1998.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 1954
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of six
units, other than for transferors who reside in Missouri at the time of
transfer who are required to transfer a minimum of ten units (except for
transfers by gift or inheritance, intrafamily transfers, family
dissolutions and transfers to affiliates).
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
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SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $10.00 per unit to $152.62 per
unit from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any deferred taxable gain if you exchange your
units for OP Units. See "Federal Income Taxation of the AIMCO Operating
Partnership and Unitholders" in the accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns
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and manages a small number of properties to an interest in a partnership that
invests in and manages a large portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
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POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the time, Moody's, Standard & Poor's and Duff & Phelps confirmed its existing
ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
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WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the Federal laws and interpretations thereof could adversely affect our
investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain
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pension trusts, registered investment companies and Mr. Considine). Our charter
also prohibits anyone from buying shares if the purchase would result in us
losing our REIT status. If you or anyone else acquires shares in excess of the
ownership limit or in violation of the ownership requirements of the Internal
Revenue Code for REITs, the transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
28.2% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your partnership
to sell its assets, distribute the net liquidation proceeds to its partners
in accordance with your partnership's agreement of limited partnership, and
then dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes,
at their option. If your partnership were to sell its assets and liquidate,
you and your partners would not need to rely upon capitalization of income
or other valuation methods to estimate the fair market value of your
partnership's assets. Instead, such assets would be valued through
negotiations with prospective purchasers. However, a liquidating sale of
your partnership's property would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners. Another option for liquidation of your investment would
be to sell your units in a private transaction. Any such sale could be at a
very substantial discount from your pro rata share of the fair market value
of your partnership's property and might involve significant expense and
delay.
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Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have
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the opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
S-14
<PAGE> 1964
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
S-15
<PAGE> 1965
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
S-16
<PAGE> 1966
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $10.00 to $152.60
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner.
S-17
<PAGE> 1967
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee equal to up to 9% of an amount equal to actual
distributions to limited partners of distributed cash from operations for its
services as general partner and may receive reimbursement for expenses incurred
in such capacity. Your general partner was paid $289,000 for fees and
reimbursements for the first six months of 1998. The property manager received
management fees of $732,000 for the first six months of 1998. We have no current
intention of changing the fee structure for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Consolidated Capital Properties IV was organized on September 22, 1981,
under the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of 18 residential
apartment complexes located in Nebraska, Tennessee, Florida, Georgia, Texas,
Colorado, Utah, South Carolina, Washington, and Oklahoma. The general partner of
your partnership is ConCap Equities, Inc., which is a majority-owned subsidiary
of AIMCO. Insignia Financial Group, Inc., which is a majority-owned subsidiary
of AIMCO, serves as manager of the properties owned by your partnership. As of
September 15, 1998, there were 342,773 units of limited partnership interest
issued and outstanding, which were held of record by 12,105 limited partners.
Your partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone
S-18
<PAGE> 1968
number at that address is (303) 757-8101. For additional information about
your partnership, please refer to the annual and quarterly reports prepared by
your partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 1969
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995, and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 1970
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 1971
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 1972
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 1973
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 1974
SUMMARY FINANCIAL INFORMATION OF CONSOLIDATED CAPITAL PROPERTIES IV
The summary financial information of Consolidated Capital Properties IV for
the six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Consolidated Capital Properties IV for the years ended December
31, 1997, 1996 and 1995 is based on audited financial statements. This
information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
CONSOLIDATED CAPITAL PROPERTIES IV
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.............................................. $ 15,025 $ 14,114 $ 29,084 $ 28,137 $ 27,282
Net Income (Loss)........................................... 1,922 608 367 2,036 (1,197)
Net Income (Loss) per limited partnership unit.............. 5.38 1.70 1.03 5.70 (3.35)
Distributions per limited partnership unit.................. 6.41 4.07 7.01 12.91 2.58
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation................ $ 31,629 $ 34,006 $ 32,163 $ 36,194 $ 38,924
Total Assets................................................ 51,791 52,316 52,381 53,844 61,146
Notes Payable............................................... 72,225 71,561 72,439 71,763 76,336
Partners' Capital (Deficit)................................. (23,660) (22,087) (23,378) (21,242) (18,633)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CONSOLIDATED CAPITAL
PARTNERSHIP PROPERTIES IV
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding................... $1.125 $1.85 $6.41 $7.01
</TABLE>
S-25
<PAGE> 1975
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $10.00 per unit to
$152.60 per unit from January 1, 1997 to September 30, 1998.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. Furthermore, your general partner has no present intention
to liquidate your partnership, and your partnership's agreement of limited
partnership does not require a sale of your partnership's properties by any
particular date.
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
S-26
<PAGE> 1976
property manager for services provided to your partnership. Your general
partner makes no recommendation to you as to whether you should tender your
units. Such conflicts of interest in connection with our offer and our
operation's differ from those conflicts of interest that currently exist for
your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages a small number of properties. In
contrast, the AIMCO Operating Partnership is in the business of acquiring,
marketing, managing and operating a large portfolio of apartment properties.
While diversification of assets may reduce certain risks of investment
attributable to a single property or entity, there can be no assurance as to the
value or performance of our securities or our portfolio of properties as
compared to the value of your units or your partnership. Proceeds of future
asset sales or refinancings by the AIMCO Operating Partnership generally will be
reinvested rather than distributed.
S-27
<PAGE> 1977
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ and current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units.
Distributions with respect to your units for the six months ended June 30, 1998
were $6.41 per unit (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units that we
are offering are expected to be , immediately following our offer, than
the distributions with respect to your units. See "Comparison of Ownership of
Your Units and AIMCO OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
deemed cash distribution. Although your general partner has no current plan or
intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
S-28
<PAGE> 1978
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in Insignia Financial Group,
Inc., which manages the properties owned by your partnership. Through
subsidiaries, AIMCO currently owns, in the aggregate, approximately a 28.2%
interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its ownership interest in certain
Insignia Partnerships which would provide a larger asset and capital base and
increased diversification. As of October , 1998, the AIMCO Operating
Partnership has made offers to of the Insignia Partnerships, including
your partnership.
S-29
<PAGE> 1979
Previous Tender Offers
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. On August 28, 1997, an affiliate of Insignia
and now our affiliate, commenced a tender offer pursuant to which it acquired
29,618 units (representing approximately 8.64% of the number outstanding) at a
cash purchase price of $140.00 per unit on October 16, 1997.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to
S-30
<PAGE> 1980
continue operating as presently structured, your partnership could be forced to
borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
S-31
<PAGE> 1981
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
S-32
<PAGE> 1982
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
S-33
<PAGE> 1983
, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of six units, other than for transferors who reside in Missouri
at the time of transfer who are required to transfer a minimum of ten units
(except for transfers by gift or inheritance, intrafamily dissolutions and
transfers to affiliates). No alternative, conditional or contingent tenders will
be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
S-34
<PAGE> 1984
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
S-35
<PAGE> 1985
Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
S-36
<PAGE> 1986
Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
S-37
<PAGE> 1987
pay for units pursuant to the offer for any reason, then, without prejudice to
the AIMCO Operating Partnership's rights under the offer, the Information Agent
may retain tendered units and those units may not be withdrawn except to the
extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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<PAGE> 1988
partnership. In addition, AIMCO owns a majority of the company that manages your
partnership's property. The AIMCO Operating Partnership currently intends that,
upon consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. The offer is not
expected to have any effect on your partnership's financial condition or results
of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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<PAGE> 1989
which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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<PAGE> 1990
lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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<PAGE> 1991
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 44,042.50 units in your
partnership have been transferred during the twelve months ended December 31,
1997 (representing approximately 12.85% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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<PAGE> 1992
approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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<PAGE> 1993
filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a complaint in the
Superior Court of the State of California, County of Los Angeles against
Insignia, the partnerships, the general partners (including your general
partner) and additional entities affiliated with several of the defendants.
Plaintiffs allege that they have requested from, but have been denied by each of
the partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the units of limited partnership
interest in each of the partnerships. The complaint also alleges that certain of
the defendants made tender offers to purchase units of limited partnership
interest in many of the partnerships, with the alleged result that plaintiffs
have been deprived of the benefits they would have realized from ownership of
the additional units. The plaintiffs assert eleven causes of action, including
breach of contract, unfair business practices, and violations of the partnership
statutes of the states in which the partnerships are organized. Plaintiffs seeks
compensatory, punitive and treble damages. Plaintiffs estimate compensatory
damages to exceed $15 million. An answer to the complaint was filed by the
defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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<PAGE> 1994
CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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<PAGE> 1995
pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
S-46
<PAGE> 1996
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
S-47
<PAGE> 1997
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION CAPITAL
PROPERTY OPERATING INCOME RATE EXPENDITURES
- -------- ---------------- -------------- --------------
<S> <C> <C> <C>
The Apartments............................. $ % $
Arbours of Hermitage Apartments............
Briar Bay Racquet Club Apartments..........
Chimney Hill Apartments....................
Citadel Apartments.........................
Citadel Village Apartments.................
Denbigh Woods Apartments...................
Foothill Place Apartments..................
Knollwood Apartments.......................
Lake Forest Apartments.....................
Nob Hill Villa Apartments..................
Overlook Apartments........................
</TABLE>
S-48
<PAGE> 1998
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION CAPITAL
PROPERTY OPERATING INCOME RATE EXPENDITURES
- -------- ---------------- -------------- --------------
<S> <C> <C> <C>
Point West Apartments...................... $ % $
Post Ridge Apartments......................
Rivers Edge Apartments.....................
South Port Apartments......................
Stratford Place Apartments.................
Village East Apartments....................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
S-49
<PAGE> 1999
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ and current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would
S-50
<PAGE> 2000
receive in exchange for each of your partnership's units. Distributions
with respect to your units for the six months ended June 30, 1998 were
$6.41 (equivalent to $ on an annualized basis). Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
partner of your partnership and the AIMCO Operating Partnership believe that the
valuation method described in "Valuation of Units" provides a meaningful
indication of value for residential apartment properties although there are
other ways to value real estate. A liquidation in the future might generate a
higher price for holders of units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions
S-51
<PAGE> 2001
analyzed by it in arriving at the estimates of value would exist at the
time of the offer. The assumptions used have been determined by the general
partner of your partnership in good faith, and, where appropriate, are based
upon current and historical information regarding your partnership and current
real estate markets, and have been highlighted below to the extent critical to
the conclusions of the general partner of your partnership. The estimated values
in the following chart are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Actual results may vary
from those set forth below based on numerous factors, including interest rate
fluctuations, tax law changes, supply and demand for similar apartment
properties, the manner in which your partnership's property is sold and changes
in availability of capital to finance acquisitions of apartment properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $10.00 to $152.60
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 63,916.5 units (representing less than 18.65%
of the total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from January 1, 1996 to September 30, 1998, as reported by the
general partner. The transfer paperwork submitted to the general partner often
does not include the requested price information or contains conflicting
information as to the actual sales price. Accordingly, you should not rely upon
this information as being completely accurate.
CONSOLIDATED CAPITAL PROPERTIES IV
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
THE GENERAL PARTNER(a)
----------------------
LOW SALES HIGH SALES
PRICE PRICE
PER UNIT PER UNIT
--------- ----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter............................................. $ 71.00 $ 152.60
Second Quarter............................................ (10.00) (147.76)
First Quarter............................................. 30.00 151.00
Fiscal Year Ended December 31, 1997:
Fourth Quarter............................................ 55.00 142.00
Third Quarter............................................. 55.00 132.15
Second Quarter............................................ 35.00 132.00
First Quarter............................................. 55.00 125.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter............................................ 54.00 115.00
Third Quarter............................................. 15.00 93.95
Second Quarter............................................ 21.00 95.00
First Quarter............................................. 25.10 78.00
</TABLE>
S-52
<PAGE> 2002
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the first day of each month. The prices in the table
are based solely on information provided to the general partner by sellers
and buyers of units transferred in sale transactions (i.e., excluding
transactions believed to result from the death of a limited partner,
rollover to an IRA account, establishment of a trust, trustee to trustee
transfers, termination of a benefit plan, distributions from a qualified or
non-qualified plan, uniform gifts, abandonment of units or similar non-sale
transactions).
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
S-53
<PAGE> 2003
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
S-54
<PAGE> 2004
similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
S-55
<PAGE> 2005
CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
S-56
<PAGE> 2006
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
S-57
<PAGE> 2007
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California laws. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Distributable Cash From Operation (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2011. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire, own, The purpose of the AIMCO Operating Partnership is to
improve, maintain, operate, lease, sell, dispose of, conduct any business that may be lawfully conducted by
finance and otherwise deal with your partnership's a limited partnership organized pursuant to the
property. Your partnership's objectives are to (1) Delaware Revised Uniform Limited Partnership Act (as
preserve and protect the limited partners' invested amended from time to time, or any successor to such
capital by investing, either alone or in association statute) (the "Delaware Limited Partnership Act"),
with others, in a diversified portfolio of provided that such business is to be conducted in a
income-producing properties, (2) provide gains through manner that permits AIMCO to be qualified as a REIT,
potential appreciation of the properties, and (3) build unless AIMCO ceases to qualify as a REIT. The AIMCO
equity through reduction of mortgage loans. Subject to Operating Partnership is authorized to perform any and
restrictions contained in your partnership's agreement all acts for the furtherance of the purposes and
of limited partnership, your partnership may perform business of the AIMCO Operating Partnership, provided
all acts necessary, advisable or convenient to the that the AIMCO Operating Partnership may not take, or
business of your partnership including borrowing money refrain from taking, any action which, in the judgment
and creating liens. of its general partner could (i) adversely affect the
ability of AIMCO to continue to qualify as a REIT, (ii)
subject AIMCO to certain income and excise taxes, or
(iii) violate any law or regulation of any governmental
body or agency (unless such action, or inaction, is
specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
S-58
<PAGE> 2008
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 400,200 units for time to the limited partners and to other persons, and
cash to selected persons who fulfill the requirements to admit such other persons as additional limited
set forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. The general partner may No action or consent by the OP Unitholders is required
not acquire properties in exchange for units. in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, the general partner and its affiliates may funds or other assets to its subsidiaries or other
acquire units from time to time on their own behalf and persons in which it has an equity investment, and such
for their own benefit, provided that such right does persons may borrow funds from the AIMCO Operating
not create any preferences in rights or benefits in Partnership, on terms and conditions established in the
favor of such persons or permit them to buy units other sole and absolute discretion of the general partner. To
than at the same cash price and on the same terms as the extent consistent with the business purpose of the
are available to other non-affiliated limited partners. AIMCO Operating Partnership and the permitted
Your partnership may not make any loans to the general activities of the general partner, the AIMCO Operating
partner but the general partner may lend money to your Partnership may transfer assets to joint ventures,
partnership on terms, as to interest rates and other limited liability companies, partnerships,
finance charges and fees, not in excess of amount that corporations, business trusts or other business
are charged by unrelated banks on comparable loans for entities in which it is or thereby becomes a
the same purpose, and, if a property is involved, in participant upon such terms and subject to such
the locality of the property. No prepayment charge or conditions consistent with the AIMCO Operating Part-
penalty will be required by the general partner on a nership Agreement and applicable law as the general
loan to your partnership. To the extent the general partner, in its sole and absolute discretion, believes
partner lends proceeds to your partnership, on an to be advisable. Except as expressly permitted by the
unsecured basis, such amounts will bear interest at an AIMCO Operating Partnership Agreement, neither the
amount not to exceed the lesser of the actual cost to general partner nor any of its affiliates may sell,
the general partner or the most recent prime rate of transfer or convey any property to the AIMCO Operating
interest charged by Bank of America, N.A., San Partnership, directly or indirectly, except pursuant to
Francisco main office, in effect on the date such loan transactions that are determined by the general partner
if first created. Your partnership may not obtain in good faith to be fair and reasonable.
long-term financing from the general partner, except
that in may issue an "all-inclusive" or "wraparound"
note if certain conditions are satisfied. Your
partnership may not grant exclusive right to sell or
exclusive employment to sell property for your
partnership to the general partner. The general partner
may not cause your partnership to enter into any
agreements with the general partner or its affiliates
which are not subject to termination without penalty by
either party upon not more than sixty days' written
notice. Your partnership may not purchase or lease
property in which the general partner has an interest
and may not acquire property from any person in whom
the general partner has an interest. Notwithstanding
the foregoing and according to the terms of your
partnership's agreement of limited partnership, the
general partner may purchase property in its own name
and temporarily hold title thereto for the purpose of
facilitating the acquisition of such property or the
borrowing of money or obtaining of financing for your
partnership, or the completion of construction of the
prop-
</TABLE>
S-59
<PAGE> 2009
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
erty, or any other purpose related to the business of
your partnership, provided that such property is
purchased by your partnership for a price no greater
than the cost of such property to the general partner
and provided there is no difference in interest rates
of the loans secured by the property at the time
acquired by the general partner and at the time
acquired by your partnership, nor any other benefit to
the general partner arising out of such transaction
apart from compensation otherwise permitted by your
partnership's agreement of limited partnership. Your
partnership may not sell or lease property to the
general partner.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to obligate and bind your partnership and to take such restrictions on borrowings, and the general partner has
action as the general partner deems necessary or full power and authority to borrow money on behalf of
advisable, including, without limitation, making, the AIMCO Operating Partnership. The AIMCO Operating
executing and delivering loan agreements, mortgages, Partnership has credit agreements that restrict, among
security agreements, promissory notes, documents other things, its ability to incur indebtedness. See
related to mortgage-backed securities, and other "Risk Factors -- Risks of Significant Indebtedness" in
documents as provided for in your partnership's the accompanying Prospectus.
agreement of limited partnership. The total
indebtedness of your partnership may not exceed 80% of
the purchase price of all properties on a combined
basis. The general partner will use its best efforts to
obtain level payment financing on the most favorable
terms available to your partnership and will not obtain
first mortgage financing incurred in connection with
property purchases, where a provision for a balloon
payment is provided, which does not contain the
following provisions, unless it obtains prior approval
from the California Department of Corporations: (1)
that such balloon payment will not be due and payable
prior the greater of ten years or three years after the
expected holding period from the later of the inception
date of the loan or the acquisition date of the
property and (2) that such loan will have regular
payments in an amount which would be sufficient to
self-liquidate the loan over a 20- to 30-year period.
Secondary financing, if any, must be fully amortizing
or, if not fully amortizing, must not be due and
payable during the expected holding period of the
property. The foregoing restrictions do not apply with
respect to any existing original financing, secondary
financing in an amount equal to less that 10% of the
purchase price of a property. Your partnership may not
incur any non-recourse indebtedness wherein the holder
will have or acquire, at any time as a result of making
the loan any direct or indirect interest in the
profits, capital or property of your partnership other
than as a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner, upon reasonable request, to with a statement of the purpose of such demand and at
inspect and copy during normal business hours the such OP Unitholder's own expense, to obtain a current
register kept by your partnership which lists the list of the name and last known business, residence or
names, addresses and business telephone numbers of all mailing address of the general partner and each other
limited partners and the number of units owned by each OP Unitholder.
limited partner. Upon request of a limited partner, the
general partner will promptly mail to such limited
partner a copy of the investor list. If the general
partner neglects or refuses to mail a copy of the
investor list as requested, the general partner may be
liable to the limited requesting the list for the cost
incurred by the limited partner in compelling the
production of the list and for actual damages incurred
by the limited partner.
</TABLE>
S-60
<PAGE> 2010
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership. Subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership, the right to vote on certain matters described under
the general partner, on behalf of your partnership, may "Comparison of Ownership of Your Units and AIMCO OP
take any action it deems necessary or advisable in Units -- Voting Rights" below. The general partner may
connection with the business of your partnership not be removed by the OP Unitholders with or without
without the consent of the limited partners. No limited cause.
partner has any authority or right to act for or bind
your partnership or participate in or have any control In addition to the powers granted a general partner of
over your partnership business except as required by a limited partnership under applicable law or that are
law. granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, except in the case of negligence or the AIMCO Operating Partnership Agreement, the general
misconduct, the general partner and its affiliate or partner is not liable to the AIMCO Operating
agents acting on their behalf are not liable, responsi- Partnership for losses sustained, liabilities incurred
ble or accountable in damages or otherwise to your or benefits not derived as a result of errors in
partnership (in any action, including a partnership judgment or mistakes of fact or law of any act or
derivative suit) or to any of the limited partners for omission if the general partner acted in good faith.
the doing of any act or the failure to do any act, the The AIMCO Operating Partnership Agreement provides for
effect of which may cause or result in loss or damage indemnification of AIMCO, or any director or officer of
to your partnership, if done in good faith to promote AIMCO (in its capacity as the previous general partner
the best interests of your partnership. The general of the AIMCO Operating Partnership), the general
partner and its affiliates or agents are entitled to be partner, any officer or director of general partner or
indemnified by your partnership from assets of your the AIMCO Operating Partnership and such other persons
partnership, or as an expense of your partnership, but as the general partner may designate from and against
not from the limited partners, against any liability or all losses, claims, damages, liabilities, joint or
loss, as a result of any claim or legal proceeding several, expenses (including legal fees), fines,
(whether or not the same proceeds to judgment or is settlements and other amounts incurred in connection
settled or otherwise brought to a conclusion) relating with any actions relating to the operations of the
to the performance or non-performance of any act AIMCO Operating Partnership, as set forth in the AIMCO
concerning the activities of your partnership except in Operating Partnership Agreement. The Delaware Limited
the case where the general partner or its affiliates or Partnership Act provides that subject to the standards
agents are guilty of bad faith, negligence, misconduct and restrictions, if any, set forth in its partnership
or reckless disregard of duty, provided such act or agreement, a limited partnership may, and shall have
omission was done in good faith to promote the best the power to, indemnify and hold harmless any partner
interests of your partnership. The indemnification or other person from and against any and all claims and
authorized by your partnership's agreement of limited demands whatsoever. It is the position of the
partnership includes the payment of reasonable Securities and Exchange Commission that indemnification
attorneys' fees and other expenses (not limited to of directors and officers for liabilities arising under
taxable costs) incurred in settling or defending any the Securities Act is against public policy and is
claims, threatened action or finally adjudicated legal unenforceable pursuant to Section 14 of the Securities
proceedings. Notwithstanding the foregoing, neither the Act of 1933.
general partner nor any officer, director, employee,
agent, subsidiary or assign of the general partner or
its affiliates are indemnified from any liability, loss
or damage incurred by them in connection
</TABLE>
S-61
<PAGE> 2011
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
with (1) any claim or settlement involving allegations
that the Securities Act of 1933 was violated by the
general partner or by any such other person or entity
unless: (i) the general partner or other persons or
entities seeking indemnification are successful in
defending such action and (ii) such indemnification is
specifically approved by a court of law which is
advised as to the current position of both the
Securities and Exchange Commission and the California
Commissioner of Corporation regarding indemnification
for violations of securities laws; or (2) any liability
imposed by law, including liability for fraud, bad
faith or negligence.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the limited partners may remove the has exclusive management power over the business and
general partner upon a vote of the holders of the affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units and the prior written partner may not be removed as general partner of the
consent of the general partner. The limited partners AIMCO Operating Partnership by the OP Unitholders with
may elect a general partner upon a vote of the limited or without cause. Under the AIMCO Operating Partnership
partners owning a majority of the outstanding units. No Agreement, the general partner may, in its sole
limited partner may substitute a transferee of his discretion, prevent a transferee of an OP Unit from
units in such limited partner's place without the becoming a substituted limited partner pursuant to the
consent of the general partner which may be withheld at AIMCO Operating Partnership Agreement. The general
the sole discretion of the general partner. partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners to add to the representations, the general partner may, without the consent of the OP
duties, or obligations of the general partner or its Unitholders, amend the AIMCO Operating Partnership
affiliates or to surrender any rights or powers granted Agreement, amendments to the AIMCO Operating
to the general partner or its affiliates for the Partnership Agreement require the consent of the
benefit of the limited partners, to comply with federal holders of a majority of the outstanding Common OP
and state securities laws and to cure any ambiguities. Units, excluding AIMCO and certain other limited
Other amendments to your partnership's agreement of exclusions (a "Majority in Interest"). Amendments to
limited partnership must be approved by the limited the AIMCO Operating Partnership Agreement may be
partners owning more than 50% of the units. However, proposed by the general partner or by holders of a
the limited partners may not amend your partnership's Majority in Interest. Following such proposal, the
agreement of limited partnership (1) to extend your general partner will submit any proposed amendment to
partnership term or (2) to alter the rights of the the OP Unitholders. The general partner will seek the
general partner to receive compensation, return of written consent of the OP Unitholders on the proposed
invested capital, allocations, and distributions, amendment or will call a meeting to vote thereon. See
without the consent of the general partner. Also, a "Description of OP Units -- Amendment of the AIMCO
unanimous vote of the limited partners is required to Operating Partnership Agreement" in the accompanying
amend the provision in your partnership's agreement of Prospectus.
limited partnership dealing with substituted limited
partners.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
Your general partner will receive an annual management The general partner does not receive compensation for
fee equal to up to 9% of an amount equal to actual its services as general partner of the AIMCO Operating
distributions to limited partners of Distributed Cash Partnership. However, the general partner is entitled
From Operations for its services as general partner and to payments, allocations and distributions in its
may receive reimbursement for expenses incurred in such capacity as general partner of the AIMCO Operating
capacity. Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
S-62
<PAGE> 2012
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Liability of Investors
<TABLE>
<S> <C>
Under California law, a limited partner is not bound by Except for fraud, willful misconduct or gross
the obligations of your partnership. A limited partner negligence, no OP Unitholder has personal liability for
is liable only to make payments of his capital the AIMCO Operating Partnership's debts and
contribution when due under your partnership's obligations, and liability of the OP Unitholders for
agreement of limited partnership. After its capital the AIMCO Operating Partnership's debts and obligations
contribution is fully paid, no limited partner will, is generally limited to the amount of their invest-
except as otherwise required by applicable law, be ment in the AIMCO Operating Partnership. However, the
required to make any further capital contributions or limitations on the liability of limited partners for
lend any funds to your partnership. the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner must diligently and partnership agreement, Delaware law generally requires
faithfully devote as much of its time, but is not a general partner of a Delaware limited partnership to
required to devote its full time, to the business of adhere to fiduciary duty standards under which it owes
your partnership and must at all times act in a its limited partners the highest duties of good faith,
fiduciary manner toward your partnership and the fairness and loyalty and which generally prohibit such
limited partners. The general partner at all times has general partner from taking any action or engaging in
a fiduciary responsibility for the safekeeping and use any transaction as to which it has a conflict of
of all partnership funds and assets. The general interest. The AIMCO Operating Partnership Agreement
partner may assign some of its general partner expressly authorizes the general partner to enter into,
functions to an affiliate; provided, however, that, on behalf of the AIMCO Operating Partnership, a right
notwithstanding any such assignment, the general of first opportunity arrangement and other conflict
partner will retain full responsibility to your avoidance agreements with various affiliates of the
partnership for the satisfactory performance of all AIMCO Operating Partnership and the general partner, on
partnership general partner duties. The general partner such terms as the general partner, in its sole and
may not commingle funds of your partnership with any absolute discretion, believes are advisable. The AIMCO
other person. Subject to its fiduciary duties, general Operating Partnership Agreement expressly limits the
partner and its affiliates may engage in whatever liability of the general partner by providing that the
activities they chose, whether the same are competitive general partner, and its officers and directors will
with your partnership or otherwise, without having or not be liable or accountable in damages to the AIMCO
incurring any obligation to offer any interest in such Operating Partnership, the limited partners or
activities to your partnership or any party hereto. The assignees for errors in judgment or mistakes of fact or
obligations of the parties are, therefore, limited law or of any act or omission if the general partner or
solely to those arising from the acquisition and such director or officer acted in good faith. See
holding of your partnership's properties. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
consid-
</TABLE>
S-63
<PAGE> 2013
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ered a "publicity traded partnership", in which case
income and loss from the AIMCO Operating Partnership
can only be offset against other income and loss from
the AIMCO Operating Partnership). Income of the AIMCO
Operating Partnership, however, attributable to
dividends from the Management Subsidiaries (as defined
below) or interest paid by the Management Subsidiaries
does not qualify as passive activity income and cannot
be offset against losses from "passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove or elect a Prospectus. So long as any institution of bankruptcy
general partner; and approve other Preferred OP Units are outstand- proceedings, an assignment for the
matters as otherwise provided in ing, in addition to any other vote benefit of creditors and certain
your partnership's agreement of or consent of partners required by transfers by the general partner of
law or by the its
</TABLE>
S-64
<PAGE> 2014
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
limited partnership. Unless prior AIMCO Operating Partnership Agree- interest in the AIMCO Operating
consent of the limited partners ment, the affirmative vote or Partnership or the admission of a
holding a majority of the units of consent of holders of at least 50% successor general partner.
your partnership is obtained, the of the outstanding Preferred OP
general partner is prohibited from Units will be necessary for Under the AIMCO Operating Partner-
(1) selling substantially all of effecting any amendment of any of ship Agreement, the general partner
your partnership's assets in a the provisions of the Partnership has the power to effect the
single sale or in multiple sales in Unit Designation of the Preferred acquisition, sale, transfer,
the same 12-month period, except in OP Units that materially and exchange or other disposition of
the orderly liquidation and winding adversely affects the rights or any assets of the AIMCO Operating
up of the business, (2) pledging preferences of the holders of the Partnership (including, but not
the credit of your partnership in Preferred OP Units. The creation or limited to, the exercise or grant
any way except in the ordinary issuance of any class or series of of any conversion, option,
course of business, (3) executing partnership units, including, privilege or subscription right or
or delivering any assignment for without limitation, any partner- any other right available in
the benefit of the creditors of ship units that may have rights connection with any assets at any
your partnership, and (4) senior or superior to the Preferred time held by the AIMCO Operating
releasing, assigning or OP Units, shall not be deemed to Partnership) or the merger,
transferring a partnership claim, materially adversely affect the consolidation, reorganization or
security, commodity or any other rights or preferences of the other combination of the AIMCO
asset in your partnership without holders of Preferred OP Units. With Operating Partnership with or into
full and adequate consideration. respect to the exercise of the another entity, all without the
above described voting rights, each consent of the OP Unitholders.
A general partner may cause the Preferred OP Units shall have one
dissolution of your partnership by (1) vote per Preferred OP Unit. The general partner may cause the
retiring. Your partnership may be dissolution of the AIMCO Operating
continued by the remaining general Partnership by an "event of
partner or, if none, the limited withdrawal," as defined in the
partners may agree to continue your Delaware Limited Partnership Act
partnership by electing a successor (including, without limitation,
general partner upon the vote of bankruptcy), unless, within 90 days
holders of more than 50% of the after the withdrawal, holders of a
units within 60 days after the "majority in interest," as defined
retirement of the general partner. in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Distributable Cash $ per Preferred OP Unit; tribute quarterly all, or such
From Operations are to be made provided, however, that at any time portion as the general partner may
quarterly during the fiscal year and from time to time on or after in its sole and absolute discretion
after the minimum units are sold. the fifth anniversary of the issue determine, of Available Cash (as
The distributions payable to the date of the Preferred OP Units, the defined in the AIMCO Operating
partners are not fixed in amount AIMCO Operating Partnership may Partnership Agreement) generated by
and depend upon the operating adjust the annual distribution rate the AIMCO Operating Partnership
results and net sales or refi- on the Preferred OP Units to the during such quarter to the general
nancing proceeds available from the lower of (i) % plus the annual partner, the special limited
disposition of your partnership's interest rate then applicable to partner and the holders of Common
assets. U.S. Treasury notes with a maturity OP Units on the record date
of five years, and (ii) the annual established by the general partner
dividend rate on the most recently with respect to such quarter, in
issued AIMCO accordance with their respective
interests in the
</TABLE>
S-65
<PAGE> 2015
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
non-convertible preferred stock AIMCO Operating Partnership on such
which ranks on a parity with its record date. Holders of any other
Class H Cumulative Preferred Stock. Preferred OP Units issued in the
Such distributions will be future may have priority over the
cumulative from the date of origi- general partner, the special
nal issue. Holders of Preferred OP limited partner and holders of
Units will not be entitled to Common OP Units with respect to
receive any distributions in excess distributions of Available Cash,
of cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may not sell, There is no public market for the There is no public market for the
transfer, encumber or otherwise Preferred OP Units and the OP Units. The AIMCO Operating Part-
dispose by operation of law or Preferred OP Units are not listed nership Agreement restricts the
otherwise of the whole or any part on any securities exchange. The transferability of the OP Units.
of his interest in your partnership Preferred OP Units are subject to Until the expiration of one year
except by written instrument restrictions on transfer as set from the date on which an OP
satisfactory in form to the general forth in the AIMCO Operating Unitholder acquired OP Units,
partner, accompanied by the Partnership Agreement. subject to certain exceptions, such
assurance of the genuineness and OP Unitholder may not transfer all
effectiveness of each such Pursuant to the AIMCO Operating or any portion of its OP Units to
signature and the obtaining of any Partnership Agreement, until the any transferee without the consent
federal and/or state governmental expiration of one year from the of the general partner, which
approval, if any, as may be date on which a holder of Preferred consent may be withheld in its sole
reasonably required by the general OP Units acquired Preferred OP and absolute discretion. After the
partner. A minimum of six units may Units, subject to certain expiration of one year, such OP
be transferred, other than for exceptions, such holder of Unitholder has the right to
transferors who reside in Missouri Preferred OP Units may not transfer transfer all or any portion of its
at the time of transfer who are all or any portion of its Pre- OP Units to any person, subject to
required to transfer a minimum of ferred OP Units to any transferee the satisfaction of certain
ten units, except for transfers by without the consent of the general conditions specified in the AIMCO
gift or inheritance, intrafamily partner, which consent may be Operating Partnership Agreement,
transfers, family dissolutions and withheld in its sole and absolute including the general partner's
transfers to affiliates. No discretion. After the expiration of right of first
assignment is valid or effective
unless in
</TABLE>
S-66
<PAGE> 2016
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
compliance with the conditions one year, such holders of Preferred refusal. See "Description of OP
contained herein. No partner may OP Units has the right to transfer Units -- Transfers and Withdrawals"
make any assignment of all or any all or any portion of its Preferred in the accompanying Prospectus.
part of his interest if said OP Units to any person, subject to
transfer or assignment would, when the satisfaction of certain After the first anniversary of
considered with all other transfers conditions specified in the AIMCO becoming a holder of Common OP
made during the same applicable Operating Partnership Agreement, Units, an OP Unitholder has the
12-month period, cause a including the general partner's right, subject to the terms and
termination of your partnership for right of first refusal. conditions of the AIMCO Operating
federal or any applicable state Partnership Agreement, to require
income tax purposes. Such After a one-year holding period, a the AIMCO Operating Partnership to
transferee may be substituted as a holder may redeem Preferred OP redeem all or a portion of the
limited partner if, in addition to Units and receive in exchange Common OP Units held by such party
the above requirements: (1) the therefor, at the AIMCO Operating in exchange for a cash amount based
assignor designates such intention Partnership's option, (i) subject on the value of shares of Class A
in the instrument of assignment, to the terms of any Senior Units, Common Stock. See "Description of
(2) the written consent of the cash in an amount equal to the OP Units -- Redemption Rights" in
general partner is obtained, the Liquidation Preference of the the accompanying Prospectus. Upon
granting of which is the general Preferred OP Units tendered for receipt of a notice of redemption,
partner's sole discretion, (3) the redemption, (ii) a number of shares the AIMCO Operating Partnership
assignment instrument is in form of Class I Cumulative Preferred may, in its sole and absolute
and substance satisfactory to the Stock of AIMCO that pay an discretion but subject to the
general partner, (4) the assignor aggregate amount of dividends yield restrictions on the ownership of
and assignee duly execute and equivalent to the distributions on Class A Common Stock imposed under
acknowledge such other instrument the Preferred OP Units tendered for AIMCO's charter and the transfer
or instruments as the general redemption and are part of a class restrictions and other limitations
partner may deem necessary or or series of preferred stock that thereof, elect to cause AIMCO to
desirable and (5) the assignee is then listed on the New York acquire some or all of the tendered
accepts, adopts and approves in Stock Exchange or another national Common OP Units in exchange for
writing all of the terms and securities exchange, or (iii) a Class A Common Stock, based on an
provisions of your partnership's number of shares of Class A Common exchange ratio of one share of
agreement of limited partnership. Stock of AIMCO that is equal in Class A Common Stock for each Com-
Value to the Liquidation Preference mon OP Unit, subject to adjustment
of the Preferred OP Units tendered as provided in the AIMCO Operating
for redemption. The Preferred OP Partnership Agreement.
Units may not be redeemed at the
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
S-67
<PAGE> 2017
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
S-68
<PAGE> 2018
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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<PAGE> 2019
OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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<PAGE> 2020
DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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<PAGE> 2021
in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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<PAGE> 2022
COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
Nature of Investment
<TABLE>
<CAPTION>
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<S> <C>
The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
</TABLE>
Voting Rights
<TABLE>
<S> <C>
Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
</TABLE>
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<PAGE> 2023
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled to receive, Holders of Class I Preferred Stock are entitled to
when and as declared by the board of directors of the receive, when and as declared by the AIMCO board of
general partner of the AIMCO Operating Partnership, directors, out of funds legally available for payment,
quarterly cash distributions at the rate of $ per cash dividends at the rate of $ per annum per
Preferred OP Unit; provided, however, that at any time share. Such dividends are cumulative from the date of
and from time to time on or after the fifth anniversary original issue. Holders of Class I Preferred Stock are
of the issue date of the Preferred OP Units, the AIMCO not be entitled to receive any dividends in excess of
Operating Partnership may adjust the annual distribu- cumulative dividends on the Class I Preferred Stock. No
tion rate on the Preferred OP Units to the lower of (i) interest, or sum of money in lieu of interest, shall be
% plus the annual interest rate then applicable to payable in respect of any dividend payment or payments
U.S. Treasury notes with a maturity of five years, and on the Class I Preferred Stock that may be in arrears.
(ii) the annual dividend rate on the most recently
issued AIMCO non-convertible preferred stock which When dividends are not paid in full upon the Class I
ranks on a parity with its Class H Cumulative Preferred Preferred Stock or any other class or series of Class I
Stock. Such distributions will be cumulative from the Parity Stock, all dividends declared upon the Class I
date of original issue. Holders of Preferred OP Units Preferred Stock and any shares of Class I Parity Stock
will not be entitled to receive any distributions in will be declared ratably in proportion to the
excess of cumulative distributions on the Preferred OP respective amounts of dividends accumulated, accrued
Units. No interest, or sum of money in lieu of and unpaid on the Class I Preferred Stock and such
interest, shall be payable in respect of any Class I Parity Stock. Unless dividends equal to the
distribution payment or payments on the Preferred OP full amount of all accumulated, accrued and unpaid
Units that may be in arrears. dividends on the Class I Preferred Stock have been
paid, or declared and set apart for payment, except in
When distributions are not paid in full upon the limited circumstances, no dividends may be declared or
Preferred OP Units or any Parity Units, all paid or set apart for payment by AIMCO and no other
distributions declared upon the Preferred OP Units and distribution of cash or other property may be declared
any Parity Units will be declared ratably in proportion or made, directly or indirectly, by AIMCO with respect
to the respective amounts of distributions accumu- to any shares of Class I Junior Stock, nor shall any
lated, accrued and unpaid on the Preferred OP Units and shares of Class I Junior Stock be redeemed, purchased
such Parity Units. Unless full cumulative distributions or otherwise acquired for any consideration, nor shall
on the Preferred OP Units have been declared and paid, any other cash or other property be paid or distributed
except in limited circumstances, no distributions may to or for the benefit of holders of shares of Class I
be declared or paid or set apart for payment by the Junior Stock. See "Description of Class I Preferred
AIMCO Operating Partnership and no other distribution Stock -- Dividends."
of cash or other property may be declared or made,
directly or indirectly, by the AIMCO Operating
Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise
acquired for consideration, nor shall any other cash or
other property be paid or distributed to or for the
benefit of holders of Junior Units. See "Description of
Preferred OP Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption
<TABLE>
<S> <C>
There is no public market for the Preferred OP Units Ownership of shares of Class I Preferred Stock by any
and the Preferred OP Units are not listed on any person will be limited such that the sum of the
securities exchange. The Preferred OP Units are subject aggregate value of all equity stock (including all
to certain restrictions on transferability set forth in shares of Class I Preferred Stock) owned directly or
the AIMCO Operating Partnership Agreement. constructively by such person may not exceed 8.7% (or
15% in the case of certain parties) of the aggregate
Pursuant to the AIMCO Operating Partnership's agreement value of all outstanding shares of equity stock.
of limited partnership, until the expiration of one Further, certain transfers which may have the effect of
year from the date on which a holder of Preferred OP causing AIMCO to lose its status as a REIT are void ab
Units acquired Preferred OP Units, subject to certain initio.
exceptions, such holder of Preferred OP Units may not
transfer all or any portion of its Preferred OP Units If any transfer of Class I Preferred Stock occurs
to any transferee without the consent of the general which, if effective, would result in any person
partner, which consent may be withheld in its sole and beneficially or constructively owning Class I Preferred
absolute discretion. After the expiration of one year, Stock in excess or in violation of the Class I
such holders of Preferred OP Units has the right to Preferred Ownership Limit, such shares of Class I
transfer all or any portion of its Preferred OP Units Preferred Stock in excess of the Class I Preferred
to any person, subject to the satisfaction of certain Ownership Limit will be automatically transferred to a
conditions specified in the AIMCO Operating Partner- trustee in his capacity as trustee of a trust for the
ship's agreement of limited partnership, including the exclusive benefit of one or more charitable
general partner's right of first refusal. beneficiaries designated by AIMCO, and the prohibited
transferee will generally have no rights in such
After a one-year holding period, a holder may redeem shares, except upon sale of the shares by the trustee.
Preferred OP Units and receive in exchange therefor, at The trustee will have all voting rights and rights to
the AIMCO Operating Partnership's option, (i) subject dividends with respect to shares of Class I Preferred
to the terms of any Senior Units, cash in an amount Stock held in the trust, which rights will be exercised
equal to the Liquidation Prefer- for the benefit of the charitable beneficiaries.
</TABLE>
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<PAGE> 2024
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
ence of the Preferred OP Units tendered for redemption, The trustee may sell the Class I Preferred Stock held
(ii) a number of shares of preferred stock of AIMCO in the trust to AIMCO or a person, designated by the
that have an aggregate dividend yield equivalent to the trustee, whose ownership of the Class I Preferred Stock
distribution yield of the Preferred OP Units tendered will not violate the Class I Preferred Ownership Limit.
for redemption and are part of a class or series of Upon such sale, the interest of the charitable
preferred stock that is then listed on the New York beneficiaries in the shares sold will terminate and the
Stock Exchange or another national securities exchange, trustee will distribute to the prohibited transferee,
or (iii) a number of shares of Class A Common Stock of the lesser of (i) the price paid by the prohibited
AIMCO that is equal in value to the Liquidation transferee for the shares or if the prohibited
Preference of the Preferred OP Units tendered for transferee did not give value for the shares in
redemption. The Preferred OP Units may not be redeemed connection with the event causing the shares to be held
at the option of the AIMCO Operating Partnership. See in the trust, the market price of such shares on the
"Description of Preferred OP Units -- Redemption." day of the event causing the shares to be held in the
trust and (ii) the price per share received by the
trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the
amount payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after , AIMCO may, at its
option, redeem shares of Class I Preferred Stock, in
whole or from time to time in part, at a cash
redemption price equal to 100% of the Class I
Liquidation Preference plus all accumulated, accrued
and unpaid dividends to the date fixed for redemption.
If full cumulative dividends on all outstanding shares
of Class I Preferred Stock have not been paid or
declared and set apart for payment, no shares of Class
I Preferred Stock may be redeemed unless all
outstanding shares of Class I Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of
its affiliates may purchase or acquire shares of Class
I Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders
of Class I Preferred Stock. The redemption price for
the Class I Preferred Stock (other than any portion
thereof consisting of accumulated, accrued and unpaid
dividends) will be payable solely with the proceeds
from the sale by AIMCO of capital stock of AIMCO or the
sale by the AIMCO Operating Partnership of partnership
interests in the AIMCO Operating Partnership (whether
or not such sale occurs concurrently with such
redemption).
</TABLE>
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<PAGE> 2025
CONFLICTS OF INTEREST
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
The general partner of your partnership became a majority-owned subsidiary
of AIMCO on October 1, 1998, when AIMCO merged with Insignia. Accordingly, the
general partner of your partnership is an affiliate of the AIMCO Operating
Partnership and, therefore, has substantial conflicts of interest with respect
to the offer. The general partner of your partnership has a fiduciary obligation
to obtain a fair offer price for you, even as a subsidiary of AIMCO. It also has
a duty to remove the property manager for your partnership's property, under
certain circumstances, even though the property manager is also an affiliate of
AIMCO. The conflicts of interest include the fact that a decision to remove, for
any reason, the general partner of your partnership from its current position as
a general partner of your partnership would result in a decrease or elimination
of the substantial management fees paid to an affiliate of the general partner
of your partnership for managing your partnership property. Additionally, we
desire to purchase units at a low price and you desire to sell units at a high
price. The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. Such conflicts
of interest in connection with the offer and the operation of AIMCO differ from
those conflicts of interest that currently exist for your partnership. See "Risk
Factors -- Risks to Offerees Who Tender Their Units in the Offer -- Conflicts of
Interest with Respect to the Offer."
CONFLICTS OF INTEREST THAT CURRENTLY EXIST FOR YOUR PARTNERSHIP
Conflicts of Interest that Currently Exist for Your Partnership. We have a
majority ownership interest in both the general partner of your partnership and
the manager of your partnership's property. The general partner of your
partnership receives an annual management fee equal to up to 9% of an amount
equal to actual distributions to limited partners of distributed cash from
operations for its services as general partner and may receive reimbursement for
expenses incurred in such capacity. The general partner of your partnership
received fees and disbursements totaling $605,000 in 1996, $608,000 in 1997 and
$289,000 for the first six months of 1998. The property manager received
management fees of $1,316,000 in 1996, $1,413,000 in 1997 and $732,000 for the
first six months of 1998. We have no current intention of changing the fee
structure for your property manager.
COMPETITION AMONG PROPERTIES
Because AIMCO and your partnership both invest in apartment properties,
these properties may compete with one another for tenants. AIMCO's policy is to
limit its management to properties which do not compete with one another.
Furthermore, you should bear in mind that AIMCO anticipates acquiring properties
in general market areas where your partnership property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts and other
operational efficiencies. In managing AIMCO's properties, the AIMCO Operating
Partnership will attempt to reduce such conflicts between competing properties
by referring prospective customers to the property considered to be most
conveniently located for the customer's needs.
FEATURES DISCOURAGING POTENTIAL TAKEOVERS
Certain provisions of AIMCO's governing documents, as well as statutory
provisions under certain state laws, could be used by AIMCO's management to
delay, discourage or thwart efforts of third parties to acquire control of, or a
significant equity interest in, AIMCO and the AIMCO Operating Partnership. See
"Comparison of Your Partnership and the AIMCO Operating Partnership."
FUTURE EXCHANGE OFFERS
If the results of operations were to improve for your partnership under
AIMCO's management, AIMCO might be required to pay a higher price for any future
exchange offers it may make for units of your partnership. Although we have no
current plans to conduct future exchange offers for your units, our plans may
change based on future circumstances. Any such future offers that we might make
could be for consideration that is more or less than the consideration we are
currently offering.
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<PAGE> 2026
YOUR PARTNERSHIP
GENERAL
Consolidated Capital Properties IV was organized on September 22, 1981,
under the laws of the State of California. Its primary business is real estate
ownership and related operations. Your partnership was formed for the purpose of
making investments in various types of real properties which offer potential
capital appreciation and cash distributions to its limited partners. Your
partnership's investment portfolio currently consists of 18 residential
apartment complexes located in Nebraska, Tennessee, Florida, Georgia, Texas,
Colorado, Utah, South Carolina, Washington, and Oklahoma. The general partner of
your partnership is ConCap Equities, Inc., which is a majority-owned subsidiary
of AIMCO. Insignia Financial Group, Inc., which is a majority-owned subsidiary
of AIMCO, serves as manager of the properties owned by your partnership. As of
September 15, 1998, there were 342,773 units of limited partnership interest
issued and outstanding, which were held of record by 12,105 limited partners.
Your partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone number at
that address is (303) 757-8101.
ADDITIONAL INFORMATION CONCERNING YOUR PARTNERSHIP
Your partnership files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document your partnership files at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Your
partnership's SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information your
partnership files with them, which means that we can disclose important
information to you about your partnership by referring you to those documents.
The following reports prepared by your partnership are incorporated by reference
and considered to be part of this Prospectus Supplement:
- Annual Report on Form 10-K for the year ended December 31, 1997;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998 and
- Current Report on Form 8-K, dated October 16, 1998.
In order to assist you in making your decision with respect to our offer,
this Prospectus Supplement is accompanied by a copy of the annual and quarterly
reports described above.
TERM OF THE PARTNERSHIP
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2011, unless sooner terminated as
provided in the agreement or by law. Limited partners could, as an alternative
to tendering their units, take a variety of possible actions, including voting
to liquidate the partnership or amending the agreement of limited partnership to
authorize limited partners to cause the partnership to merge with another entity
or engage in a "roll-up" or similar transaction.
GENERAL POLICY REGARDING SALES AND REFINANCINGS OF PARTNERSHIP PROPERTIES
In general, the general partner of your partnership regularly evaluates the
partnership's properties by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors each property's specific locale and sub-market
conditions evaluating current trends, competition, new construction and economic
changes. The general partner oversees each asset's operating performance and
continuously evaluates the physical improvement requirements. In addition, the
financing structure for each property, tax implications and the investment
climate are all considered. Any of these factors, and possibly others, could
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property.
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<PAGE> 2027
Based on the above considerations, the general partner has determined that
it is not in the best interests of limited partners to sell or refinance any
property at the present time.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a
majority-owned subsidiary of AIMCO. Pursuant to the management agreement between
the property manager and your partnership, the property manager operates your
partnership's property, establishes rental policies and rates and directs
marketing activities. The property manager also is responsible for maintenance,
the purchase of equipment and supplies, and the selection and engagement of all
vendors, suppliers and independent contractors.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, the general partner of your partnership is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, except in the case of negligence or
misconduct, the general partner and its affiliate or agents acting on their
behalf are not liable, responsible or accountable in damages or otherwise to
your partnership (in any action, including a partnership derivative suit) or to
any of the limited partners for the doing of any act or the failure to do any
act, the effect of which may cause or result in loss or damage to your
partnership, if done in good faith to promote the best interests of your
partnership. As a result, unitholders might have a more limited right of action
in certain circumstances than they would have in the absence of such a provision
in your partnership's agreement of limited partnership. The general partner of
your partnership is majority-owned by AIMCO. See "Conflicts of Interest."
The general partner and its affiliates or agents are entitled to
indemnification by your partnership from assets of your partnership, or as an
expense of your partnership, but not from the limited partners, against any
liability or loss, as a result of any claim or legal proceeding (whether or not
the same proceeds to judgment or is settled or otherwise brought to a
conclusion) relating to the performance or non-performance of any act concerning
the activities of your partnership except in the case where the general partner
or its affiliates or agents are guilty of bad faith, negligence, misconduct or
reckless disregard of duty, provided such act or omission was done in good faith
to promote the best interests of your partnership. The indemnification
authorized by your partnership's agreement of limited partnership includes the
payment of reasonable attorneys' fees and other expenses (not limited to taxable
costs) incurred in settling or defending any claims, threatened action or
finally adjudicated legal proceedings. Notwithstanding the foregoing, neither
the general partner nor any officer, director, employee, agent, subsidiary or
assign of the general partner or its affiliates are indemnified from any
liability, loss or damage incurred by them in connection with (1) any claim or
settlement involving allegations that the Securities Act of 1933 was violated by
the general partner or by any such other person or entity unless: (i) the
general partner or other persons or entities seeking indemnification are
successful in defending such action and (ii) such indemnification is
specifically approved by a court of law which is advised as to the current
position of both the Securities and Exchange Commission and the California
Commissioner of Corporation regarding indemnification for violations of
securities laws; or (2) any liability imposed by law, including liability for
fraud, bad faith or negligence.
Your partnership must at all times maintain public liability insurance in
amounts determined by the general partner for the protection of your partnership
and cash of its members.
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<PAGE> 2028
DISTRIBUTIONS
The following table sets forth the distributions paid per unit in the
periods indicated below. The original cost per unit was $500.00.
<TABLE>
<CAPTION>
PERIOD DISTRIBUTIONS
- ------ -------------
<S> <C>
January 1, 1995 - December 31, 1995......................... $ 2.58
January 1, 1996 - December 31, 1996......................... 12.91
January 1, 1997 - December 31, 1997......................... 7.01
January 1, 1998 - June 30, 1998............................. 6.41
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate approximately
a 28.2% interest in your partnership, including 96,098 units held by us and the
interest held by ConCap Equities, Inc., as general partner of your partnership.
Except as set forth above, neither the AIMCO Operating Partnership, nor, to the
best of its knowledge, any of its affiliates, (i) beneficially own or have a
right to acquire any units, (ii) have effected any transactions in the units in
the past 60 days, or (iii) have any contract, arrangement, understanding or
relationship with any other person with respect to any securities of your
partnership, including, but not limited to, contracts, arrangements,
understandings or relationships concerning transfer or voting thereof, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies.
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The general partner of your partnership received total compensation (which
includes all monies paid to the general partner by your partnership including
reimbursement for expenses) in respect of its capacity as general partner of
your partnership as described in the following table:
<TABLE>
<CAPTION>
YEAR COMPENSATION
- ---- ------------
<S> <C>
1994........................................................ $505,000
1995........................................................ 645,000
1996........................................................ 605,000
1997........................................................ 608,000
1998 (through June 30)...................................... 289,000
</TABLE>
In addition, a majority-owned subsidiary of AIMCO manages the property of
your partnership. Your partnership has historically paid the property management
fees as described in the following table:
<TABLE>
<CAPTION>
YEAR FEES
- ---- ----------
<S> <C>
1994........................................................ $ 570,000
1995........................................................ 1,223,000
1996........................................................ 1,316,000
1997........................................................ 1,413,000
1998 (through June 30)...................................... 732,000
</TABLE>
If the offer had been made in such prior periods, there would not have been
any material difference in the compensation that would have been paid to the
general partner of your partnership, or the compensation paid to the property
manager or AIMCO and its affiliates.
S-79
<PAGE> 2029
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $
million will be required to purchase all of the units sought in the offer, if
such units are tendered for cash. The AIMCO Operating Partnership will obtain
all such funds from cash from operations, equity issuances and short term
borrowings.
Below is an itemized statement of the estimated expenses incurred and to be
incurred in the offer by the AIMCO Operating Partnership:
<TABLE>
<S> <C>
Information Agent Fees...................................... $
Accountant's Fees........................................... $
Legal Fees.................................................. $
Printing Fees............................................... $
Stanger's Fees.............................................. $
Other....................................................... $
</TABLE>
If funds are borrowed to consummate the offer, we intend to use our amended
and restated credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") and BankBoston, N.A. The credit agreement
provides a revolving credit facility of up to $100 million, including a swing
line of up to $30 million. The AIMCO Operating Partnership is the borrower under
the credit facility, and all obligations thereunder are guaranteed by AIMCO and
certain of its subsidiaries. The annual interest rate under the credit facility
is based on either LIBOR or a base rate which is the higher of Bank of America's
reference rate or 0.5% over the federal funds rate, plus, in either case, an
applicable margin. The AIMCO Operating Partnership elects which interest rate
will be applicable to particular borrowings under the credit facility. The
margin ranges between 1.25% and 2.0% in the case of LIBOR-based loans and
between negative 0.25% and positive 0.5% in the case of base rate loans,
depending upon a ratio of the AIMCO Operating Partnership's consolidated
unsecured indebtedness to the value of certain unencumbered assets. The credit
facility matures on October 1, 1999 unless extended, at the discretion of the
lenders. The credit facility provides for the conversion of the revolving
facility into a three year term loan. The availability of funds to the AIMCO
Operating Partnership under the credit facility is subject to certain borrowing
base restrictions and other customary restrictions, including compliance with
financial and other covenants thereunder. The financial covenants require the
AIMCO Operating Partnership to maintain a ratio of debt to gross asset value of
no more than 0.55 to 1.0, an interest coverage ratio of 2.25 to 1.0 and a fixed
charge coverage ratio of at least 1.6 to 1.0 through December 31, 1998, 1.7 to
1.0 from January 1, 1999 through June 30, 1999, and 1.8 to 1.0 thereafter. In
addition, the credit facility limits the AIMCO Operating Partnership from
distributing more than 80% of its Funds From Operations (as defined) to holders
of OP Units, imposes minimum net worth requirements and provides other financial
covenants related to certain unencumbered assets.
Following the IPT merger, we may obtain funds pursuant to a credit
agreement entered into by Insignia Properties, L.P. ("IPLP"), the operating
partnership for IPT, with Lehman Commercial Paper, Inc., as syndication agent,
First Union National Bank, as administrative agent and the lenders from time to
time parties thereto. Pursuant to the credit agreement, which is guaranteed by
IPT, the lenders have made available to IPLP a revolving credit facility of up
to $50,000,000 at any one time outstanding which matures in a single installment
on December 30, 2000. Loans may be borrowed by IPLP at a rate based upon the
adjusted LIBOR Rate (as defined in the credit agreement) or the Base Rate (as
defined in the credit agreement). IPT is obligated to pay a commitment fee at a
rate of 0.25% per annum on the undrawn portion of the line of credit. The credit
agreement includes customary covenants and restrictions on IPLP's ability to,
among other things, incur debt or contingent obligations, grant liens, sell
assets, make distributions or make investments. In addition, the credit
agreement contains certain financial covenants.
S-80
<PAGE> 2030
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion to the
effect that the Common OP Units and the Preferred OP Units offered by this
Prospectus Supplement will be validly issued, fully paid and nonassessable.
Skadden, Arps, Slate, Meagher & Flom LLP will deliver an opinion as to the
status of AIMCO as a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has
previously performed certain legal services on behalf of AIMCO and the AIMCO
Operating Partnership and their affiliates.
The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is not attached to
this Prospectus Supplement. However, upon receipt of a written request by a
unitholder or representative so designated in writing, a copy of such opinion
will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Consolidated Capital Properties IV
appearing in Consolidated Capital Properties IV Annual Report (Form 10-K) for
the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
S-81
<PAGE> 2031
APPENDIX A
OPINION OF ROBERT A. STANGER & CO., INC.
PRELIMINARY FORM OF OPINION
AIMCO Properties, L.P.
1873 South Bellaire -- Suite 1700
Denver, Colorado 80222
Re: [ ]
Gentlemen:
You have advised us that AIMCO Properties, L.P. (the "Purchaser"), a
subsidiary of Apartment Investment and Management Company ("AIMCO"), which
directly or indirectly owns the general partner (the "General Partner") of
[ ] (the "Partnership") (the Purchaser,
AIMCO, the General Partner and other affiliates and subsidiaries of AIMCO are
referred to herein collectively as the "Company"), is contemplating a
transaction (the "Offer") in which a minority of the outstanding limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $ in cash, or
Common OP Units of the Purchaser, or Preferred OP Units of the Purchaser,
or a combination of any of such forms of consideration. The limited partners of
the Partnership (the "Limited Partners") will have the choice to maintain their
current interest in the Partnership or exchange their Units for any or a
combination of such forms of consideration. The amount of cash, Common OP Units
or Preferred OP Units offered per Unit is referred to herein as the "Offer
Price."
You have requested that Robert A. Stanger & Co., Inc. ("Stanger") provide
its opinion as to whether the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets.
In the course of our analysis for rendering this opinion, we have, among
other things:
1. Reviewed a draft of the Prospectus Supplement related to the Offer
in a form management has represented to be substantially the same as will
be distributed to the Limited Partners;
2. Reviewed the Partnership's annual reports on Form 10-K filed with
the Securities and Exchange Commission for the years ended December 31,
1995, 1996 and 1997, and quarterly report on Form 10-QSB for the period
ending June 30, 1998, which the Partnership's management has indicated to
be the most current available financial statements;
3. Reviewed descriptive information concerning the properties owned by
the Partnership (the "Properties"), including location, number of units and
unit mix, age, amenities and land acreage;
A-1
<PAGE> 2032
4. Reviewed summary historical operating statements for the
Properties, for the years ended December 31, 1996 and 1997, and the six
months ending June 30, 1998;
5. Reviewed the 1998 operating budget for the Properties prepared by
the Partnership's management;
6. [Reviewed multi-year operating projections for the Properties and
the Partnership prepared by the Partnership's management, including
revenues and expenses, net operating income, occupancy, capital
improvements, debt service, residual value, and, in the case of the
Partnership, general and administrative expenses and cash distributions to
the General Partners and the Limited Partners;]
7. [Reviewed internal analysis prepared by the Partnership of the
estimated current net liquidation value of the Partnership per Unit of
limited partnership interest;]
8. Discussed with management market conditions for the Properties;
conditions in the market for sales/acquisitions of properties similar to
that owned by the Partnership; historical, current and expected operations
and performance of the Properties and the Partnership; the physical
condition of the Properties including any deferred maintenance; and other
factors influencing value of the Properties and the Partnership;
9. Performed a site inspection of each of the Properties;
10. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Properties, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Properties;
11. Reviewed information provided by the Company relating to debt
encumbering the Properties;
12. [Reviewed any bids received for the Properties or publicly
disclosed tender offers for the Units during the past two years;] and
13. Conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In rendering this opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and management reports and data, and all other reports and
information contained in the Prospectus Supplement or that were provided, made
available or otherwise communicated to us by the Partnership and the Company. We
have not performed an independent appraisal, engineering study or environmental
study of the assets and liabilities of the Partnership. We have relied upon the
representations of the Partnership and the Company concerning, among other
things, any environmental liabilities, deferred maintenance and estimated
capital expenditures and replacement reserve requirements, the determination and
valuation of non-real estate assets and liabilities of the Partnership, the
terms and conditions of any debt encumbering the Properties, the allocation of
net Partnership values between the General Partner, Special Limited Partner and
Limited Partners, and the transaction costs and fees associated with a sale of
the Properties. We have also relied upon the assurance of the Partnership and
the Company that any financial statements, projections, capital expenditure
estimates, debt summaries, value estimates and other information contained in
the Prospectus Supplement or otherwise provided or communicated to us were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of the Partnership Agreement, and
reflect the best currently available estimates and good faith judgments; that no
material changes have occurred in the value of the Properties or other
information reviewed between the date such information was provided and date of
this letter; that the Partnership and the Company are not aware of any
information or facts that would cause the information supplied to us to be
incomplete or misleading; that the highest and best use of the Properties is as
improved; and that all calculations were made in accordance with the terms of
the Partnership Agreement.
In addition, you have advised us that upon consummation of the Offer, the
Partnership will continue its business and operations substantially as they are
currently being conducted and that the Partnership and the Company do not have
any present plans, proposals or intentions which relate to or would result in an
extraordinary transaction, such as a merger, reorganization or liquidation
involving the Partnership; a sale of
A-2
<PAGE> 2033
the Partnership's Properties or the sale or transfer of a material amount of the
Partnership's other assets; any changes to the Partnership's senior management
or personnel or their compensation; any changes in the Partnership's present
capitalization or distribution policy; or any other material changes in the
Partnership's structure or business.
We have not been requested to, and therefore did not: (i) select the Offer
Price or the method of determining the Offer Price in connection with the Offer;
(ii) make any recommendation to the Partnership or its partners with respect to
whether to accept or reject the Offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the Offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of the Partnership or all
or any part of the Partnership; or (iv) express any opinion as to (a) the tax
consequences of the proposed Offer to the Limited Partners, (b) the terms of the
Partnership Agreement or of any agreements or contracts between the Partnership
and the Company, (c) the Company's business decision to effect the Offer or
alternatives to the Offer, (d) the amount of expenses relating to the Offer or
their allocation between the Company and the Partnership or tendering Limited
Partners; (e) the relative value of the cash, Preferred OP Units or Common OP
Units to be issued in connection with the Offer; and (f) any adjustments made to
determine the Offer price and the net amounts distributable to the Limited
Partners, including but not limited to, balance sheet adjustments to reflect the
Partnership's estimate of the value of current net working capital balances,
reserve accounts, and liabilities, and adjustments to the Offer Price for
distributions made by the Partnership subsequent to the date of the initial
Offer. We are not expressing any opinion as to the fairness of any terms of the
Offer other than the Offer Price for the Units.
Our opinion is based on business, economic, real estate and capital market,
and other conditions as they existed and could be evaluated as of the date of
our analysis and addresses the Offer in the context of information available as
of the date of our analysis. Events occurring after that date could affect the
assumptions used in preparing the opinion.
The summary of the opinion set forth in the Prospectus Supplement does not
purport to be a complete description of the analyses performed, or the matters
considered, in rendering our opinion. The analyses and the summary set forth
must be considered as a whole, and selecting portions of such summary or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying this opinion. In rendering this
opinion, judgment was applied to a variety of complex analyses and assumptions.
The assumptions made, and the judgments applied, in rendering the opinion are
not readily susceptible to partial analysis or summary description. The fact
that any specific analysis is referred to in the Prospectus Supplement is not
meant to indicate that such analysis was given greater weight than any other
analysis.
Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter the Offer Price is fair to the Limited Partners of the
Partnership from a financial point of view.
Yours truly,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
October , 1998
A-3
<PAGE> 2034
APPENDIX B
DIRECTORS AND EXECUTIVE OFFICERS OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AND
AIMCO-GP, INC.
The names and positions of the executive officers of Apartment Investment
and Management Company ("AIMCO"), AIMCO-GP, Inc. ("AIMCO-GP"), and the general
partner of your partnership, and the directors of AIMCO, are set forth below.
The two directors of AIMCO-GP and the general partner of your partnership are
Terry Considine and Peter Kompaniez. Unless otherwise indicated, the business
address of each executive officer and director is 1873 South Bellaire Street,
17th Floor, Denver, Colorado 80222. Each executive officer and director is a
citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Terry Considine.............................. Chairman of the Board of Directors and Chief Executive
Officer
Peter K. Kompaniez........................... Vice Chairman, President and Director
Thomas W. Toomey............................. Executive Vice President -- Finance and Administration
Joel F. Bonder............................... Executive Vice President, General Counsel and
Secretary
Patrick J. Foye.............................. Executive Vice President
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
David L. Williams............................ Executive Vice President -- Property Operations
Harry G. Alcock.............................. Senior Vice President -- Acquisitions
Troy D. Butts................................ Senior Vice President and Chief Financial Officer
Richard S. Ellwood........................... Director
J. Landis Martin............................. Director
Thomas L. Rhodes............................. Director
John D. Smith................................ Director
</TABLE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Terry Considine...................... Mr. Considine has been Chairman of the Board of Directors
and Chief Executive Officer of AIMCO and AIMCO-GP since July
1994. He is the sole owner of Considine Investment Co. and
prior to July 1994 was owner of approximately 75% of
Property Asset Management, L.L.C., Limited Liability
Company, a Colorado limited liability company, and its
related entities (collectively, "PAM"), one of AIMCO's
predecessors. On October 1, 1996, Mr. Considine was
appointed Co-Chairman and director of Asset Investors Corp.
and Commercial Asset Investors, Inc., two other public real
estate investment trusts, and appointed as a director of
Financial Assets Management, LLC, a real estate investment
trust manager. Mr. Considine has been involved as a
principal in a variety of real estate activities, including
the acquisition, renovation, development and disposition of
properties. Mr. Considine has also controlled entities
engaged in other businesses such as television broadcasting,
gasoline distribution and environmental laboratories. Mr.
Considine received a B.A. from Harvard College, a J.D. from
Harvard Law School and is admitted as a member of the
Massachusetts Bar.
</TABLE>
B-1
<PAGE> 2035
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Peter K. Kompaniez................... Mr. Kompaniez has been Vice Chairman and a director of AIMCO
since July 1994 and was appointed President of AIMCO in July
1997. Mr. Kompaniez has served as Vice President of AIMCO-GP
from July 1994 through July 1998 and was appointed President
in July 1998. Mr. Kompaniez has been a director of AIMCO-GP
since July 1994. Since September 1993, Mr. Kompaniez has
owned 75% of PDI Realty Enterprises, Inc., a Delaware
corporation ("PDI"), one of AIMCO's predecessors, and serves
as its President and Chief Executive Officer. From 1986 to
1993, he served as President and Chief Executive Officer of
Heron Financial Corporation ("HFC"), a United States holding
company for Heron International, N.V.'s real estate and
related assets. While at HFC, Mr. Kompaniez administered the
acquisition, development and disposition of approximately
8,150 apartment units (including 6,217 units that have been
acquired by the AIMCO) and 3.1 million square feet of
commercial real estate. Prior to joining HFC, Mr. Kompaniez
was a senior partner with the law firm of Loeb and Loeb
where he had extensive real estate and REIT experience. Mr.
Kompaniez received a B.A. from Yale College and a J.D. from
the University of California (Boalt Hall).
Thomas W. Toomey..................... Mr. Toomey has served as Senior Vice President -- Finance
and Administration of AIMCO since January 1996 and was
promoted to Executive Vice-President-Finance and
Administration in March 1997. Mr. Toomey has been Executive
Vice President -- Finance and Administration of AIMCO-GP
since July 1998. From 1990 until 1995, Mr. Toomey served in
a similar capacity with Lincoln Property Company ("LPC") as
well as Vice President/Senior Controller and Director of
Administrative Services of Lincoln Property Services where
he was responsible for LPC's computer systems, accounting,
tax, treasury services and benefits administration. From
1984 to 1990, he was an audit manager with Arthur Andersen &
Co. where he served real estate and banking clients. From
1981 to 1983, Mr. Toomey was on the audit staff of Kenneth
Leventhal & Company. Mr. Toomey received a B.S. in Business
Administration/Finance from Oregon State University and is a
Certified Public Accountant.
Joel F. Bonder....................... Mr. Bonder was appointed Executive Vice President and
General Counsel of AIMCO since December 8, 1997. Mr. Bonder
has been Executive Vice President and General Counsel of
AIMCO-GP since July 1998. Prior to joining AIMCO, Mr. Bonder
served as Senior Vice President and General Counsel of NHP
from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June
1991 to March 1994 and as Associate General Counsel of NHP
from 1986 to 1991. From 1983 to 1985, Mr. Bonder was with
the Washington, D.C. law firm of Lane & Edson, P.C. From
1979 to 1983, Mr. Bonder practiced with the Chicago law firm
of Ross and Hardies. Mr. Bonder received an A.B. from the
University of Rochester and a J.D. from Washington
University School of Law.
</TABLE>
B-2
<PAGE> 2036
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Patrick J. Foye...................... Mr. Foye has served as Executive Vice President of AIMCO and
AIMCO-GP since May 1998. Prior to joining AIMCO, Mr. Foye
was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP from 1989 to 1998 and was Managing
Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of
the Long Island Power Authority and serves as a member of
the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law
School.
Robert Ty Howard..................... Mr. Howard has served as Executive Vice
President -- Ancillary Services since February 1998. Mr.
Howard was appointed Executive Vice President -- Ancillary
Services of AIMCO-GP in July 1998. Prior to joining AIMCO,
Mr. Howard served as an officer and/or director of four
affiliated companies, Hecco Ventures, Craig Corporation,
Reading Company and Decurion Corporation. Mr. Howard was
responsible for financing, mergers and acquisitions
activities, investments in commercial real estate, both
nationally and internationally, cinema development and
interest rate risk management. From 1983 to 1988, he was
employed by Spieker Properties. Mr. Howard received a B.A.
from Amherst College, a J.D. from Harvard Law School and an
M.B.A. from Stanford University Graduate School of Business.
Steven D. Ira........................ Mr. Ira is a Co-Founder of AIMCO and has served as Executive
Vice President of AIMCO since July 1994. Mr. Ira has been
Executive Vice President of AIMCO-GP since July 1998. From
1987 until July 1994, he served as President of PAM. Prior
to merging his firm with PAM in 1987, Mr. Ira acquired
extensive experience in property management. Between 1977
and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan,
Pennsylvania and Florida, and in 1981 he joined with others
to form the property management firm of McDermott, Stein and
Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former
president of both the National Apartment Association and the
Colorado Apartment Association. Mr. Ira is the sixth
individual elected to the Hall of Fame of the National
Apartment Association in its 54-year history. He holds a
Certified Apartment Property Supervisor (CAPS) and a
Certified Apartment Manager designation from the National
Apartment Association, a Certified Property Manager (CPM)
designation from the National Institute of Real Estate
Management (IREM) and he is a member of the Board of
Directors of the National Multi-Housing Council, the
National Apartment Association and the Apartment Association
of Metro Denver. Mr. Ira received a B.S. from Metropolitan
State College in 1975.
</TABLE>
B-3
<PAGE> 2037
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
David L. Williams.................... Mr. Williams has been Executive Vice President -- Operations
of AIMCO since January 1997. Mr. Williams has been Executive
Vice President -- Operations of AIMCO-GP since July 1998.
Prior to joining AIMCO, Mr. Williams was Senior Vice
President of Operations at Evans Withycombe Residential,
Inc. from January 1996 to January 1997. Previously, he was
Executive Vice President at Equity Residential Properties
Trust from October 1989 to December 1995. He has served on
National Multi-Housing Council Boards and NAREIT committees.
Mr. Williams also served as Senior Vice President of
Operations and Acquisitions of US Shelter Corporation from
1983 to 1989. Mr. Williams has been involved in the property
management, development and acquisition of real estate
properties since 1973. Mr. Williams received his B.A. in
education and administration from the University of
Washington in 1967.
Harry G. Alcock...................... Mr. Alcock has served as Vice President of AIMCO and
AIMCO-GP since July 1996, and was promoted to Senior Vice
President -- Acquisitions in October 1997, with
responsibility for acquisition and financing activities
since July 1994. From June 1992 until July 1994, Mr. Alcock
served as Senior Financial Analyst for PDI and HFC. From
1988 to 1992, Mr. Alcock worked for Larwin Development
Corp., a Los Angeles based real estate developer, with
responsibility for raising debt and joint venture equity to
fund land acquisitions and development. From 1987 to 1988,
Mr. Alcock worked for Ford Aerospace Corp. He received his
B.S. from San Jose State University.
Troy D. Butts........................ Mr. Butts has served as Senior Vice President and Chief
Financial Officer of AIMCO since November 1997. Mr. Butts
has been Senior Vice President and Chief Financial Officer
of AIMCO-GP since July 1998. Prior to joining AIMCO, Mr.
Butts served as a Senior Manager in the audit practice of
the Real Estate Services Group for Arthur Andersen LLP in
Dallas, Texas. Mr. Butts was employed by Arthur Andersen LLP
for ten years and his clients were primarily publicly-held
real estate companies, including office and multi-family
real estate investment trusts. Mr. Butts holds a Bachelor of
Business Administration degree in Accounting from Angelo
State University and is a Certified Public Accountant.
Richard S. Ellwood................... Mr. Ellwood was appointed a Director of AIMCO in July 1994
12 Auldwood Lane and is currently Chairman of the Audit Committee. Mr.
Rumson, NJ 07660 Ellwood is the founder and President of R.S. Ellwood & Co.,
Incorporated, a real estate investment banking firm. Prior
to forming R.S. Ellwood & Co., Incorporated in 1987, Mr.
Ellwood had 31 years experience on Wall Street as an
investment banker, serving as: Managing Director and senior
banker at Merrill Lynch Capital Markets from 1984 to 1987;
Managing Director at Warburg Paribas Becker from 1978 to
1984; general partner and then Senior Vice President and a
director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to 1968.
Mr. Ellwood currently serves as a director of FelCor Suite
Hotels, Inc. and Florida East Coast Industries, Inc.
</TABLE>
B-4
<PAGE> 2038
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
J. Landis Martin..................... Mr. Martin was appointed a Director of AIMCO in July 1994
199 Broadway and became Chairman of the Compensation Committee in March
Suite 4300 1998. Mr. Martin has served as President and Chief Executive
Denver, CO 80202 Officer and a Director of NL Industries, Inc., a
manufacturer of titanium dioxide, since 1987. Mr. Martin has
served as Chairman of Tremont Corporation, a holding company
operating through its affiliates Titanium Metals Corporation
("TIMET") and NL Industries, Inc., since 1990 and as Chief
Executive Officer and a director of Tremont since 1998. Mr.
Martin has served as Chairman of Timet, an integrated
producer of titanium, since 1987 and Chief Executive Officer
since January 1995. From 1990 until its acquisition by
Dresser Industries, Inc. ("Dresser") in 1994, Mr. Martin
served as Chairman of the Board and Chief Executive Officer
of Baroid Corporation, an oilfield services company. In
addition to Tremont, NL and TIMET, Mr. Martin is a director
of Dresser, which is engaged in the petroleum services,
hydrocarbon and engineering industries.
Thomas L. Rhodes..................... Mr. Rhodes was appointed a Director of AIMCO in July 1994.
215 Lexingon Avenue Mr. Rhodes has served as the President and a Director of
4th Floor National Review magazine since November 30, 1992, where he
New York, NY 10016 has also served as a Director since 1998. From 1976 to 1992
, he held various positions at Goldman, Sachs & Co. and was
elected a General Partner in 1986 and served as a General
Partner from 1987 until November 27, 1992. He is currently
Co-Chairman of the Board , Co-Chief Executive Officer and a
Director of Commercial Assets Inc. and Asset Investors
Corporation. He also serves as a Director of Delphi
Financial Group, Inc. and its subsidiaries, Delphi
International Ltd., Oracle Reinsurance Company, and the
Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman
of the Empire Foundation for Policy Research, a Founder and
Trustee of Change NY, a Trustee of The Heritage Foundation,
and a Trustee of the Manhattan Institute.
John D. Smith........................ Mr. Smith was appointed a Director of AIMCO in November
3400 Peachtree Road 1994. Mr. Smith is Principal and President of John D. Smith
Suite 831 Developments. Mr. Smith has been a shopping center
Atlanta, GA 30326 developer, owner and consultant for over 8.6 million square
feet of shopping center projects including Lenox Square in
Atlanta, Georgia. Mr. Smith is a Trustee and former
President of the International Council of Shop ping Centers
and was selected to be a member of the American Society of
Real Estate Counselors. Mr. Smith served as a Director for
Pan-American Properties, Inc. (National Coal Board of Great
Britain) formerly known as Continental Illinois Properties.
He also serves as a director of American Fidelity Assurance
Companies and is retained as an advisor by Shop System Study
Society, Tokyo, Japan.
</TABLE>
B-5
<PAGE> 2039
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and any other required documents should be
sent or delivered by you or your broker, dealer, bank, trust company or other
nominee to the Information Agent as set forth below.
Questions and requests for assistance or for additional copies of this
Prospectus Supplement and the Letter of Transmittal may be directed to the
Information Agent at its telephone number and address listed below. You may also
contact your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the offer is:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
<PAGE> 2040
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1998)
AIMCO PROPERTIES, L.P.
IS OFFERING TO ACQUIRE UNITS OF LIMITED PARTNERSHIP INTEREST OF
CONSOLIDATED CAPITAL PROPERTIES V
IN EXCHANGE FOR YOUR CHOICE OF:
OF OUR TAX-DEFERRAL % PARTNERSHIP PREFERRED UNITS;
OF OUR TAX-DEFERRAL PARTNERSHIP COMMON UNITS; OR
$ IN CASH.
<TABLE>
<S> <C>
GENERALLY, YOU WILL NOT RECOGNIZE ANY WE WILL ONLY ACCEPT A MAXIMUM OF % OF
IMMEDIATE TAXABLE GAIN OR LOSS IF YOU THE OUTSTANDING UNITS IN RESPONSE TO OUR OFFER.
EXCHANGE YOUR UNITS SOLELY FOR OUR IF MORE UNITS ARE TENDERED TO US, WE WILL
SECURITIES. HOWEVER, YOU WILL RECOGNIZE GENERALLY ACCEPT UNITS ON A PRO RATA BASIS
TAXABLE GAIN OR LOSS IF YOU EXCHANGE YOUR ACCORDING TO THE NUMBER OF UNITS TENDERED BY
UNITS FOR CASH. EACH PERSON. OUR OFFER IS NOT SUBJECT TO ANY
MINIMUM NUMBER OF UNITS BEING TENDERED.
WE HAVE RETAINED ROBERT A. STANGER &
CO., INC. TO CONDUCT AN ANALYSIS OF OUR YOU WILL NOT PAY ANY FEES OR COMMISSIONS
OFFER AND TO RENDER AN OPINION AS TO THE IF YOU TENDER YOUR UNITS.
FAIRNESS TO YOU OF THE OFFER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW. OUR OFFER, YOUR WITHDRAWAL RIGHTS AND
THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
OUR OFFER CONSIDERATION WILL BE REDUCED DENVER, COLORADO TIME, ON ,
FOR ANY DISTRIBUTIONS SUBSEQUENTLY MADE BY 1998, UNLESS WE EXTEND THE DEADLINE.
YOUR PARTNERSHIP PRIOR TO THE EXPIRATION OF
OUR OFFER.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE S-26 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration without any arms-length
negotiations. Accordingly, our offer consideration may not reflect the
fair market value of your units. As of June 30, 1998, your general
partner estimated the net asset value of your units to be $49.00 per unit
and an affiliate estimated the net liquidation value of your units to be
$48.77 per unit.
- Your general partner is an affiliate of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- If we acquire additional units in your partnership, we will increase our
ability to influence voting decisions of your partnership.
- An investment in our securities involves real estate investment,
financing, management, acquisition and development risks.
- We may change our investment, acquisition and financing policies without
a vote of our securityholders.
- If you acquire our securities, the nature of your investment will change
from holding an interest in three properties to holding an interest in
our large portfolio of properties. In the future, the properties owned by
your partnership may outperform our portfolio of assets.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
October , 1998
<PAGE> 2041
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER.......... S-1
SUMMARY........................................ S-7
The AIMCO Operating Partnership.............. S-7
Affiliation with your General Partner........ S-7
The Offer.................................... S-7
Risk Factors................................. S-7
Background and Reasons for the Offer......... S-12
Terms of the Offer........................... S-14
Certain Federal Income Tax Matters........... S-16
Valuation of Units........................... S-16
Fairness of the Offer........................ S-17
Stanger Analysis............................. S-17
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-18
Comparison of Your Units and AIMCO OP
Units...................................... S-18
Conflicts of Interest........................ S-18
Your Partnership............................. S-18
Source and Amount of Funds and Transactional
Expenses................................... S-19
Summary Financial Information of AIMCO
Properties, L.P............................ S-20
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-22
Summary Financial Information of Consolidated
Capital Properties V....................... S-25
Comparative Per Unit Data.................... S-25
THE AIMCO OPERATING PARTNERSHIP................ S-26
RISK FACTORS................................... S-26
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
THE OFFER...................................... S-33
Terms of the Offer; Expiration Date.......... S-33
Acceptance for Payment and Payment for
Units...................................... S-33
Procedure for Tendering Units................ S-34
Withdrawal Rights............................ S-37
Extension of Tender Period; Termination;
Amendment.................................. S-37
Proration.................................... S-38
Fractional OP Units.......................... S-38
Future Plans of the AIMCO Operating
Partnership................................ S-38
Voting by the AIMCO Operating Partnership.... S-39
Dissenters' Rights........................... S-39
Conditions of the Offer...................... S-39
Effects of the Offer......................... S-41
Certain Legal Matters........................ S-42
Fees and Expenses............................ S-44
Accounting Treatment......................... S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN FEDERAL INCOME TAX MATTERS............. S-45
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-45
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-45
Tax Consequences of Exchanging Units Solely
for Cash................................... S-46
Adjusted Tax Basis........................... S-46
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-47
Passive Activity Losses...................... S-47
Foreign Offerees............................. S-48
VALUATION OF UNITS............................. S-48
FAIRNESS OF THE OFFER.......................... S-49
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-49
Fairness to Unitholders who Tender their
Units...................................... S-50
Fairness to Unitholders who do not Tender
their Units................................ S-51
Comparison of Consideration to Alternative
Consideration.............................. S-51
Allocation of Consideration.................. S-54
STANGER ANALYSIS............................... S-55
Experience of Stanger........................ S-55
Summary of Materials Considered.............. S-55
Summary of Reviews........................... S-56
Conclusions.................................. S-57
Assumptions, Limitations and
Qualifications............................. S-57
Compensation and Material Relationships...... S-58
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-59
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-65
DESCRIPTION OF PREFERRED OP UNITS.............. S-69
General...................................... S-69
Ranking...................................... S-69
Distributions................................ S-69
Allocation................................... S-70
Liquidation Preference....................... S-70
Redemption................................... S-71
Voting Rights................................ S-71
Restrictions on Transfer..................... S-71
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-72
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-74
CONFLICTS OF INTEREST.......................... S-77
Conflicts of Interest with Respect to the
Offer...................................... S-77
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-77
Competition Among Properties................. S-77
Features Discouraging Potential Takeovers.... S-77
Future Exchange Offers....................... S-77
</TABLE>
i
<PAGE> 2042
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
YOUR PARTNERSHIP............................... S-78
General...................................... S-78
Additional Information Concerning Your
Partnership................................ S-78
Originally Anticipated Term of the
Partnership................................ S-78
General Policy Regarding Sales and
Refinancings of Partnership Properties..... S-79
Property Management.......................... S-79
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-79
Distributions................................ S-80
Beneficial Ownership of Interests in Your
Partnership................................ S-80
Compensation Paid to the General Partner and
its Affiliates............................. S-80
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-81
LEGAL MATTERS.................................. S-82
EXPERTS........................................ S-82
OPINION OF ROBERT A. STANGER & CO., INC. ...... A-1
DIRECTORS AND EXECUTIVE OFFICERS OF APARTMENT
INVESTMENT AND MANAGEMENT COMPANY AND
AIMCO-GP, INC. .............................. B-1
</TABLE>
ii
<PAGE> 2043
QUESTIONS AND ANSWERS ABOUT THE OFFER
Q: WHAT AM I BEING OFFERED?
A: We are offering to acquire your units of limited partnership interest in
Consolidated Capital Properties V. For each unit that you tender, you may
choose to receive of our Tax-Deferral % Partnership
Preferred Units (also referred to as "Preferred OP Units"),
of our Tax-Deferral Partnership Common Units (also referred to as "Common
OP Units"), or $ in cash (subject, in each case to adjustment for
any distributions paid to you during the offer period). If you like, you
can choose to keep any or all of your units.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS IF I SELL MY UNITS?
A: No.
Q: WHO IS AIMCO PROPERTIES, L.P.?
A: AIMCO Properties, L.P. is the operating partnership which conducts
substantially all of the operations of Apartment Investment and Management
Company, a real estate investment trust ("AIMCO"). As of October 1, 1998,
AIMCO was the largest owner and manager of multifamily apartment properties
in the United States, with a total portfolio of 396,090 apartment units in
2,303 properties located in 49 states, the District of Columbia and Puerto
Rico. As of June 30, 1998, AIMCO had total assets of $3,055 million, total
debt of $1,314 million and stockholders' equity of $1,394 million. On a pro
forma basis, giving effect to our recently completed merger with Insignia
Financial Group, Inc. and related transactions, as of June 30, 1998, AIMCO
had total assets of $3,996 million, total debt of $1,491 million and
stockholders' equity of $2,002 million.
Q: WHAT IS THE RELATIONSHIP BETWEEN AIMCO AND YOUR PARTNERSHIP?
A: On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in ConCap Equities, Inc., the
managing general partner of your partnership (the "general partner"), and
the company that manages the property owned by your partnership.
Q: WHY IS THE OFFER BEING MADE?
A: We are in the business of acquiring direct and indirect interests in
apartment properties. The offer provides us with an opportunity to increase
our ownership interest in the property owned by your partnership. The offer
also provides you and other investors in your partnership with an
opportunity to liquidate your current investment and to invest in our
securities or receive cash, or to retain your units.
Q: WHAT ARE TAX-DEFERRAL % PREFERRED OP UNITS?
A: Tax-Deferral % Preferred OP Units are a class of our Partnership
Preferred Units. Tax-Deferral % Preferred OP Units are not listed on any
national securities exchange nor quoted on NASDAQ. There is no active
trading market for Tax-Deferral % Preferred OP Units and none is likely
to develop because they are subject to restrictions on transfer. However,
after a one-year holding period, a holder of Tax-Deferral % Preferred
OP Units may redeem his or her units for shares of AIMCO's Class I
Preferred Stock, shares of AIMCO's Class A Common Stock or cash, at our
option. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock Exchange.
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL %
PREFERRED OP UNITS?
A: There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash.
S-1
<PAGE> 2044
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of Tax-
Deferral Common OP Units. However, one class of outstanding Partnership
Preferred Units has prior distribution rights and the Tax-Deferral %
Preferred OP Units rank equal to six other outstanding classes of
Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT ARE TAX-DEFERRAL COMMON OP UNITS?
A: The Tax-Deferral Common OP Units are our Partnership Common Units.
Tax-Deferral Common OP Units are not listed on any national securities
exchange nor quoted on the NASDAQ System. There is no active trading market
for Tax-Deferral Common OP Units and none is likely to develop because they
are subject to restrictions on transfer. However, after a one-year holding
period, a holder of Tax-Deferral Common OP Units may redeem his or her
units for shares of AIMCO's Class A Common Stock (on a one-for-one basis,
subject to adjustment in certain circumstances) or, at our option, an
equivalent amount of cash. AIMCO's Class A Common Stock is listed and
traded on the New York Stock Exchange under the symbol "AIV." On October
20, 1998, the last reported sale price of AIMCO Class A Common Stock on the
New York Stock Exchange was $33 7/16. The following table shows the high
and low reported sales prices and dividends declared per share of AIMCO's
Class A Common Stock for the periods indicated. The table also shows the
distributions per unit declared on the Tax-Deferral Common OP Units for the
same periods.
<TABLE>
<CAPTION>
CLASS A PARTNERSHIP
COMMON STOCK COMMON
--------------------------- UNITS
CALENDAR QUARTERS HIGH LOW DIVIDEND DISTRIBUTION
----------------- ---- --- -------- ------------
<S> <C> <C> <C> <C>
1998
Fourth Quarter (through October 20,
1998)............................... $37 1/8 $30 $ -- $ --
Third Quarter.......................... 41 30 15/16 0.5625 0.5625
Second Quarter......................... 38 7/8 36 1/2 0.5625 0.5625
First Quarter.......................... 38 5/8 34 1/4 0.5625 0.5625
1997
Fourth Quarter......................... 38 32 0.5625 0.5625
Third Quarter.......................... 36 3/16 28 1/8 0.4625 0.4625
Second Quarter......................... 29 3/4 26 0.4625 0.4625
First Quarter.......................... 30 1/2 25 1/2 0.4625 0.4625
1996
Fourth Quarter......................... 28 3/8 21 1/8 0.4625 0.4625
Third Quarter.......................... 22 18 3/8 0.4250 0.4250
Second Quarter......................... 21 18 3/8 0.4250 0.4250
First Quarter.......................... 21 1/8 19 3/8 0.4250 0.4250
</TABLE>
Q: WHAT ARE THE ADVANTAGES TO ME OF EXCHANGING UNITS FOR TAX-DEFERRAL COMMON
OP UNITS?
A: There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock or an equivalent amount of cash.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
S-2
<PAGE> 2045
- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis). Historically, the quarterly
distributions paid on the Tax-Deferral Common OP Units have been
equivalent to the dividends paid on AIMCO's Class A Common Stock. We
expect this to continue in the future.
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in \the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
Q: WHAT IS THE ADVANTAGE OF TENDERING UNITS FOR CASH?
A: There are two principal advantages of tendering units for cash:
- Immediate liquidity. If you tender your units for cash, you will receive
$ per unit. However, tendering your units for cash may cause you to
recognize taxable gain for Federal income tax purposes.
- Ease of tax reporting. After this year, you will not receive a Schedule
K-1 tax form containing tax information used for preparing your Federal
income tax return. This may simplify the preparation of your tax return.
Q: HOW DO THE DISTRIBUTIONS ON MY UNITS COMPARE WITH THE DISTRIBUTIONS I WILL
RECEIVE IF I EXCHANGE MY UNITS FOR TAX-DEFERRAL % PREFERRED OP UNITS OR
TAX-DEFERRAL COMMON OP UNITS?
A: Your partnership has not paid distributions since 1990. We will pay fixed
quarterly distributions of $ per unit on the Tax-Deferral %
Preferred OP Units before any distributions are paid to holders of
Tax-Deferral Common OP Units. We pay quarterly distributions on the
Tax-Deferral Common OP Units based on our funds from operations for that
quarter. For the six months ended June 30, 1998, we paid distributions of
$1.125 on each of the Tax-Deferral Common OP Units (equivalent to $2.25 on
an annual basis). This is equivalent to distributions of $ per year
on the number of Tax-Deferral % Preferred OP Units, or $ per year on
the number of Tax-Deferral Common OP Units, that you would receive in an
exchange for each of your partnership's units.
Q: WHAT ARE THE DISADVANTAGES AND RISKS I SHOULD CONSIDER?
A: We determined our offer consideration without any arms-length negotiations.
Thus, the offer consideration may not necessarily reflect the value of your
units if they were sold to someone else or if the assets of your
partnership were liquidated and the net proceeds distributed to you and
your partners. If you tender your units for cash, you may have to pay
taxes. If you tender your units in exchange for Tax-Deferral % Preferred
OP Units or Tax-Deferral Common OP Units, the nature of your investment
will change from holding an interest in three properties to holding an
interest in an operating business that owns and manages a large portfolio
of properties, with risks that do not exist for your partnership. You
should review the risk factors in this Prospectus Supplement and in the
accompanying Prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE OFFER TO ME?
A: You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for
Tax-Deferral % Preferred OP Units or Tax-Deferral Common OP Units. You
will generally recognize a taxable gain or loss for Federal income tax
purposes on units you sell for cash. The exchange of your units for cash
and OP Units will be treated, for Federal income tax purposes, as a partial
sale of such units for cash, and as a partial tax-free contribution of such
units to our operating partnership.
S-3
<PAGE> 2046
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING YOUR UNITS IN THE OFFER. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO YOU IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE
SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS. THE
PARTICULAR TAX CONSEQUENCES OF THE OFFER TO YOU WILL DEPEND ON A NUMBER OF
FACTORS RELATED TO YOUR TAX SITUATION. YOU SHOULD REVIEW "CERTAIN FEDERAL
INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT AND "FEDERAL INCOME
TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME TAXATION OF THE
AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
Q: WHAT ARE MY ALTERNATIVES TO TENDERING UNITS?
A: As alternatives to tendering your units, you may retain your units or,
subject to the terms of your partnership's agreement of limited
partnership, seek a private sale of your units. However, your partnership's
agreement of limited partnership contains certain restrictions on the
resale of your units, and the market for your units may be limited. Your
partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in your
partnership to be transferred within such 12-month period. If we acquire a
significant percentage of the interest in your partnership, you may not be
able to transfer your units for a 12-month period following the offer.
Q: WHAT HAPPENS IF I DON'T TENDER MY UNITS?
A: If you choose to retain your units, your investment will remain unchanged.
However, if we acquire additional interests in your partnership, we will
increase our ability to influence voting decisions with respect to your
partnership.
Q: WHAT ARE MY UNITS WORTH?
A: The general partner of your partnership has received an opinion of an
independent firm that our offer consideration is fair. However, your units
are not listed on any national securities exchange nor quoted on NASDAQ,
and there is no established trading market for your units. Secondary sales
activity for the units has been limited and sporadic. Based on information
recorded by the general partner of your partnership, we believe that sales
prices for your units have ranged from $3.42 per unit to $55.00 per unit
for the period from January 1, 1997 to September 30, 1998. As of June 30,
1998, your general partner estimated the net asset value of your units to
be $49.00 per unit and an affiliate of your general partner estimated the
net liquidation value of your units to be $48.77 per unit. However, we do
not believe that these valuations represent the current fair market value
of your units.
Q: HOW WAS THE CASH OFFER CONSIDERATION FOR MY UNITS DETERMINED?
A: We determined the cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of the property owned by your partnership using the
direct capitalization method. This method involves applying a
capitalization rate to your partnership's annual net operating income. We
determined an appropriate capitalization rate using our best judgment, but
our valuation is just an estimate. Although the direct capitalization
method is a widely-accepted way of valuing real estate, there are a number
of other methods available to value real estate, each of which may result
in different valuations of the property. The proceeds that you would
receive if you sold your units to someone else or if your partnership were
actually liquidated might be higher or lower than our offer consideration.
An actual liquidation may also result in your paying taxes.
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL % PREFERRED OP UNITS TO
BE OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by the $100 liquidation preference
of the Tax-Deferral % Preferred OP Units.
S-4
<PAGE> 2047
Q: HOW DID YOU DETERMINE THE NUMBER OF TAX-DEFERRAL COMMON OP UNITS TO BE
OFFERED IN EXCHANGE FOR MY UNITS?
A: We divided the cash offer consideration by $ , which represents the
closing price of the AIMCO Class A Common Stock on the NYSE on a recent
date prior to our commencement of this offer.
Q: HAS THERE BEEN ANY INDEPENDENT EVALUATION OF THE FAIRNESS OF THE OFFER
CONSIDERATION?
A: We have retained Robert A. Stanger & Co., Inc. ("Stanger") to conduct an
analysis of the offer and to render an opinion as to the fairness to you of
the offer consideration. Stanger is not affiliated with us or your general
partner. Stanger is one of the leaders in the field of analyzing and
evaluating complex real estate transactions. However, we provided much of
the information used by Stanger in evaluating our offer. We believe that
the information we provided to Stanger is accurate.
Q: DOES MY GENERAL PARTNER RECOMMEND THAT I TENDER MY UNITS?
A: Your general partner is affiliated with us and, therefore, has substantial
conflicts of interest with respect to our offer. Accordingly, your general
partner makes no recommendation to you as to whether to tender or refrain
from tendering any of your units in the offer. However, your general
partner believes that you should make your decision based on a number of
factors, including your financial position, your risk profile, your desire
for liquidity, other financial opportunities available to you and your tax
position.
Q: WHAT DO I NEED TO DO NOW?
A: First, you should read this Prospectus Supplement and the accompanying
Prospectus thoroughly and discuss it with your financial and tax advisors.
Second, you should decide if you want to tender any of your units and, if
so, whether you prefer to receive Tax-Deferral % Preferred OP Units,
Tax-Deferral Common OP Units, cash or a combination. Third, if you do want
to tender any of your units, you should fill out the Letter of Transmittal
that accompanies these materials and send it to the Information Agent
listed on the back cover of this Prospectus Supplement.
Q: ARE THERE ANY RESTRICTIONS ON THE UNITS I MAY TENDER?
A: You may tender any or all of your units. However, your partnership's
agreement of limited partnership requires that you tender a minimum of 12
units. You may tender fractional units only if you are tendering all of
your units.
Q: WHEN WILL THE OFFER BE COMPLETED AND WHEN WILL I RECEIVE TAX-DEFERRAL %
PREFERRED OP UNITS, TAX-DEFERRAL COMMON OP UNITS OR CASH?
A: You have until , 1998 to send your Letter of Transmittal
to the Information Agent. As soon as practicable after the
, 1998 deadline, we will deliver to you the Tax-Deferral % Preferred OP
Units, Tax-Deferral Common OP Units or cash to which you are entitled.
However, we reserve the right to extend, terminate or amend the offer and,
under certain circumstances, to delay payment for your units.
Q: CAN I CHANGE MY MIND AFTER I HAVE SENT MY LETTER OF TRANSMITTAL TO THE
INFORMATION AGENT?
A: Yes. You can withdraw your Letter of Transmittal or submit a new one,
changing the number of units you wish to tender or the form of payment you
choose to receive. However, you must do this before the expiration of the
offer, and you must follow the instructions provided with the Letter of
Transmittal and any instructions of the Information Agent.
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Q: WHOM DO I CONTACT FOR ADDITIONAL INFORMATION OR IF I HAVE QUESTIONS?
A: You should feel free to contact the Information Agent as set forth below:
RIVER OAKS PARTNERSHIP SERVICES, INC.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 2065 111 Commerce Road 111 Commerce Road
S. Hackensack, N.J. 07606-2065 Carlstadt, N.J. 07072 Carlstadt, N.J. 07072
Attn.: Reorganization Dept. Attn.: Reorganization Dept.
</TABLE>
By Telephone:
TOLL FREE (888) 349-2005
or
(201) 896-1900
On the Internet:
www.clc-online.com
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<PAGE> 2049
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company, or "AIMCO". AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. Through
wholly owned subsidiaries, AIMCO acts as the sole general partner of, and owns
approximately an 89% interest in, the AIMCO Operating Partnership. As of October
1, 1998, our portfolio of owned or managed properties included 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. Based on apartment unit data compiled as of January 1, 1998 by the
National Multi Housing Council, we believe that this made us the largest owner
and manager of multifamily apartment properties in the United States. As of
October 1, 1998, we:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
Our principal executive offices are located at 1873 South Bellaire Street,
Denver, Colorado 80222, and our telephone number is (303) 757-8101.
AFFILIATION WITH YOUR GENERAL PARTNER
As a result of our October 1, 1998 merger with Insignia Financial Group,
Inc., we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- of our Tax-Deferral % Preferred OP Units;
- of our Tax-Deferral Common OP Units; or
- $ in cash;
in each case, subject to reduction for any distribution subsequently made by
your partnership prior to the expiration of our offer.
We will only accept a maximum of % of the outstanding units in
response to our offer. If more units are tendered to us, we will generally
accept units on a pro rata basis according to the number of units tendered by
each person. Our offer is not subject to any minimum number of units being
tendered.
Our offer will expire at 5:00 p.m., Denver, Colorado time, on
, 1998, unless we extend the deadline.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-26 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer:
NO THIRD PARTY VALUATION OR APPRAISAL. We did not use any third-party
appraisal or valuation to determine the value of your partnership's property. We
established the terms of our offer, including the
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exchange ratios and the cash consideration, without any arms-length
negotiations. We have retained Robert A. Stanger & Co., Inc. to conduct an
analysis of our offer and to render an opinion as to the fairness to you of our
offer consideration, from a financial point of view.
OFFER CONSIDERATION MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your
partnership's properties may outperform our larger, more diversified portfolio
of assets. Although we cannot predict the future value of your partnership's
properties, our offer consideration could be less than the net proceeds that you
would realize upon a future liquidation of your partnership. Accordingly, you
might receive more value if you retain your units until your partnership is
liquidated. However, you may prefer to receive the offer consideration now
rather than wait for uncertain future net liquidation proceeds. As of June 30,
1998, your general partner estimated the net asset value of your units to be
$49.00 per unit and an affiliate of your general partner estimated the net
liquidation value of your units to be $48.77 per unit. However, we do not
believe that these valuations represent the current fair market value of your
units.
OFFER CONSIDERATION MAY NOT NECESSARILY REPRESENT FAIR MARKET VALUE. There
is no established or regular trading market for your units, nor is there another
reliable standard for determining the fair market value of the units. If you
need or desire liquidity, you may wish to consider the offer. However, the offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units or upon a liquidation of your partnership's
assets. Such prices could be higher or lower than the offer consideration. Based
on information recorded by the general partner of your partnership, we believe
that sales prices for your units have ranged from $3.42 per unit to $55.00 per
unit for the period from January 1, 1997 to September 30, 1998.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to our offer.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. You will not receive
any future distributions on units that we acquire from you. If you elect to
receive our Preferred OP Units or Common OP Units ("OP Units") in exchange for
your units, you will be entitled to future distributions from us.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, if you exchange your units
solely for our OP Units, it will not be a taxable transaction. If you sell your
units for cash, you will recognize taxable gain or loss in an amount equal to
the difference between the amount realized on the sale and your adjusted tax
basis in your units. If you exchange your units for both cash and OP Units, it
will be treated, for Federal income tax purposes, as a partial taxable sale of
such units for cash and as a partial tax-free contribution of such units to our
operating partnership. If you tender your units for cash or for both cash and OP
Units, the "amount realized" will be measured by the sum of the cash received
plus the portion of your partnership's liabilities allocated to the units sold
for Federal income tax purposes. To the extent that the amount of cash received
plus the allocable share of your partnership's liabilities exceeds your tax
basis for the units sold, you will recognize gain. Consequently, your tax
liability resulting from such gain could exceed the amount of cash you receive
from us. See "Certain Federal Income Tax Matters."
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences of the offer
to you will depend upon a number of factors related to your individual tax
situation, including your tax basis in your units, whether you dispose of all of
your units in your partnership, and whether the "passive loss" rules apply to
your investments. Because the income tax consequences of an exchange of units
will not be the same for everyone, you should consult your tax advisor before
determining whether to tender your units pursuant to our offer.
CERTAIN TAX RISKS ASSOCIATED WITH AN INVESTMENT IN OP UNITS. There are
certain tax risks associated with the acquisition of, holding and disposing of
OP Units. Although your general partner has no present intention to liquidate or
sell your partnership's property or prepay the current mortgage on the property
within any specified time period, any such action in the future generally will
require you to fully recognize any
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<PAGE> 2051
deferred taxable gain if you exchange your units for OP Units. See "Federal
Income Taxation of the AIMCO Operating Partnership and Unitholders" in the
accompanying Prospectus.
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you tender your
units for our OP Units, you will have changed fundamentally the nature of your
investment from an interest in a partnership that owns and manages three
properties to an interest in a partnership that invests in and manages a large
portfolio of properties.
UNCERTAINTY OF PUBLIC TRADING MARKET. We cannot predict the price at which
our stock will trade in the future. Recently, there have been fluctuations in
the trading prices for many real estate investment trust ("REIT") equity
securities, including ours.
COMPANY AUTHORITY. If you tender your units for OP Units, you will have
less effective power in influencing our policies than you currently have in
influencing the policies of your partnership.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of an interest if such
transfer, together with all other transfers during the preceding 12 months,
would cause 50% or more of the total interest in your partnership to be
transferred within such 12-month period. If we acquire a significant percentage
of the interest in your partnership, you may not be able to transfer your units
for a 12-month period following our offer.
UNCERTAIN FUTURE DISTRIBUTIONS. Although our operating partnership makes
quarterly distributions based on its available cash, there can be no assurance
regarding the amounts of available cash that our operating partnership will
generate or the portion that we will choose to distribute.
LIMITATIONS ON CHANGE OF CONTROL. Our charter has restrictions on the
ownership of our equity securities in order to comply with certain REIT tax
requirements. The limited partners of the AIMCO Operating Partnership are unable
to remove the general partner of the AIMCO Operating Partnership or to vote in
the election of AIMCO's directors unless they own shares of AIMCO. As a result,
our limited partners and stockholders are limited in their ability to effect a
change of control of the AIMCO Operating Partnership and AIMCO.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES. We have been,
and continue to be, involved in various transactions with a number of our
affiliates, including executive officers, directors, and entities in which they
own interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority or our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY. Conflicts of interest
have arisen and could arise in the future as a result of the relationships
between the general partner of the AIMCO Operating Partnership and its
affiliates, on the one hand, and the AIMCO Operating Partnership or any partner
thereof, on the other. The directors and officers of the general partner of the
AIMCO Operating Partnership have fiduciary duties to AIMCO, as its sole
stockholder. At the same time, as general partner of the AIMCO Operating
Partnership, it has fiduciary duties to the AIMCO Operating Partnership's
partners.
LACK OF TRADING MARKET FOR OP UNITS. There is no public market for our OP
Units. In addition, the AIMCO Operating Partnership's agreement of limited
partnership restricts the transferability of OP Units. We have no plans to list
the OP Units on a securities exchange. It is unlikely that any person will make
a market in the OP Units, or that an active market for the OP Units will
develop.
LIMITED VOTING RIGHTS OF HOLDERS OF OP UNITS. The AIMCO Operating
Partnership is managed and operated by its general partner. Unlike the holders
of common stock in a corporation, holders of OP Units have only limited voting
rights on matters affecting the AIMCO Operating Partnership's business. Holders
of OP Units have no right to elect the general partner on an annual or other
continuing basis, and the general partner may not be removed by holders of OP
Units. As a result, holders of OP Units have limited influence on matters
affecting the operation of the AIMCO Operating Partnership and third parties may
find it difficult to attempt to gain control or influence the activities of our
operating partnership.
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<PAGE> 2052
DILUTION OF INTERESTS OF HOLDERS OF OP UNITS. We may issue an unlimited
number of additional OP Units or other securities for such consideration and on
such terms as we may establish, without the approval of the holders of OP Units.
Such securities could have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such issuance may be
to dilute the interests of holders of OP Units.
POSSIBLE INCREASE IN CONTROL BY AIMCO. As a result of the offer, we may
increase our ability to influence voting decisions with respect to your
partnership. Also, removal of your general partner or the property manager of
your partnership's property may become more difficult or impossible without our
consent or approval.
GENERAL RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES. The selective
acquisition, development and expansion of apartment properties is one component
of our growth strategy. However, we can make no assurance as to our ability to
complete future acquisitions. Although we seek acquisitions and development
activities that are accretive on a per share basis, acquisitions and development
activities may fail to perform in accordance with our expectations.
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned and/or managed
properties from 132 properties with 29,343 units to 2,303 properties with
396,090 units. These acquisitions have included purchases of properties,
interests in entities that own or manage properties and corporate mergers. The
recent Insignia merger is our largest acquisition so far. We can provide no
assurance that we will be able to successfully integrate any acquired businesses
or properties.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases,
we have acquired the general partner of a partnership and then made an offer to
acquire the limited partners' interests in the partnership. In these
transactions, we are sometimes subject to litigation based on claims that the
general partner has breached its fiduciary duties to its limited partners or
that the transaction violates the relevant partnership agreement.
RISKS ASSOCIATED WITH DEBT FINANCING. Our organizational documents do not
limit the amount of debt that we may incur, and we have significant amounts of
debt outstanding. Payments of principal and interest may leave us with
insufficient cash resources to operate our properties or pay distributions
required to be paid in order to maintain our qualification as a REIT. If we fail
to make required payments of principal and interest on any debt, our lenders
could foreclose on the properties securing such debt with a consequent loss of
income and asset value to us.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO. Recently, Moody's Investors Service
("Moody's") revised its outlook for our ratings from stable to negative to
reflect its concerns surrounding our ability to successfully implement our
financial strategy while maintaining a prudent capital structure as a result of
more difficult general capital market conditions. Moody's noted that our access
to the public markets may prove challenging in light of the volatility in both
the equity and capital markets for REITs and assigned a "ba3" rating to a class
of preferred stock proposed to be issued by us. Moody's indicated that its
rating action reflects our increasing leveraged profile, including high levels
of secured debt and preferred stock, limited financial flexibility and
integration risks resulting from the merger with Insignia. Moody's also noted
our high level of encumbered properties and material investments in loans to
highly leveraged partnerships in which we own a general partnership interest. At
the same time, Moody's, Standard & Poor's and Duff & Phelps confirmed its
existing ratings on our preferred stock and senior debt.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE. As of June
30, 1998, approximately $182 million of our debt was subject to variable
interest rates. An increase in interest rates could increase our interest
expense and adversely affect our cash flow.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS. From time to time, in
anticipation of refinancing debt, we enter into agreements to reduce the risks
associated with increases in short-term interest rates. Although these
agreements provide us with some protection against rising interest rates, these
agreements also reduce the benefits to us when interest rates decline.
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<PAGE> 2053
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR
INVESTORS. Some of our debt and other securities contain covenants that restrict
our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. In some cases, our
subsidiaries are subject to similar provisions, which may restrict their ability
to make distributions to us.
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES. Many
of our properties are owned by subsidiaries. As a result, we depend on
distributions and other payments from the subsidiaries in order to satisfy our
financial obligations and make payments to our investors. The ability of the
subsidiaries to make such distributions and other payments is dependent upon
their earnings and may be subject to statutory or contractual limitations.
REAL ESTATE INVESTMENT RISKS. Our ability to make payments to our investors
depends on our ability to generate funds from operations in excess of required
debt payments and capital expenditure requirements. Funds from operations and
the value of our properties may be adversely affected by events or conditions
which are beyond our control, including local conditions that might adversely
affect apartment occupancy or rental rates, increases in operating costs, and
changes in governmental regulations and the related costs of compliance.
POSSIBLE ENVIRONMENTAL LIABILITIES. Various Federal, state and local laws
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous substances released on a property. The presence
of, or the failure to properly remediate, hazardous substances may adversely
affect occupancy at contaminated apartment communities and our ability to sell
or borrow against contaminated properties.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED
EXPENSES. Under the Americans with Disabilities Act of 1990, all places of
public accommodation are required to meet certain Federal requirements related
to access and use by disabled persons. Although we believe that our properties
are substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with them.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. We own interests in or
manage many properties that benefit from governmental programs intended to
provide housing to people with low or moderate incomes. As a condition to the
receipt of assistance under these programs, the properties must comply with
various requirements, which typically limit rents to pre-approved amounts. If
permitted rents on a property are insufficient to cover costs, a sale of the
property may become necessary, which could result in a loss of management fee
revenue.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES. We
manage some properties owned by third parties. We may suffer a loss of revenue
if we lose our right to manage these properties or if the rental revenues upon
which our management fees are based decline.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although we have entered into
employment agreements with our Chairman of the Board and Chief Executive
Officer, our President and one of our Executive Vice Presidents, the loss of any
of their services could have an adverse effect on our operations.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. If we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to stockholders
in computing our taxable income and we would be subject to Federal income tax at
regular corporate rates. In addition, unless we are entitled to relief under the
tax law, we could not elect to be taxed as a REIT for four years following the
year during which we were disqualified. Therefore, if we lose our REIT status,
the funds available for payment to our investors would be reduced substantially
for each of the years involved.
EFFECT OF REIT DISTRIBUTION REQUIREMENTS. As a REIT, we are subject to
annual distribution requirements, which limit the amount of cash we have
available for other business purposes, including amounts to fund our growth.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S.
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Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect our investors.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES. Our charter
limits ownership of our common stock by any single shareholder to 8.7% of the
outstanding shares (or 15% in the case of certain pension trusts, registered
investment companies and Mr. Considine). Our charter also prohibits anyone from
buying shares if the purchase would result in us losing our REIT status. If you
or anyone else acquires shares in excess of the ownership limit or in violation
of the ownership requirements of the Internal Revenue Code for REITs, the
transfer will be considered null and void.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO
ACQUIRE CONTROL OF AIMCO. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors. Under our charter, our board of directors has
the authority to classify and reclassify any of our unissued shares of capital
stock into shares of preferred stock with such preferences, rights, powers and
restrictions as our board of directors may determine. The authorization and
issuance of preferred stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control were in our
stockholders' best interests. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' best interests.
BACKGROUND AND REASONS FOR THE OFFER
Background of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
On October 1, 1998, we merged with Insignia Financial Group, Inc. In doing
so, we acquired a majority ownership interest in the general partner of your
partnership and the company that manages the property owned by your partnership.
Through our subsidiaries, we currently own, in the aggregate, approximately a
26.18% interest in your partnership.
One of the reasons we acquired Insignia was that we expected to make offers
to acquire limited partnership interests of some of the limited partnerships
formerly controlled or managed by Insignia, including your partnership.
We contacted Robert A. Stanger & Co., Inc. in August 1998 to discuss the
possibility of Stanger providing an independent fairness opinion for our offer
consideration. We chose Stanger based on Stanger's expertise and strong
reputation in this area of work. On October 20, 1998, we entered into an
agreement with Stanger to provide such a fairness opinion for your partnership
and other partnerships.
Alternatives Considered
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by your general partner:
Liquidation. One alternative to our offer would be for your
partnership to sell its assets, distribute the net liquidation proceeds to
its partners in accordance with your partnership's agreement of limited
partnership, and then dissolve. Partners would be at liberty to use the net
liquidation proceeds after taxes for investment, business, personal or
other purposes, at their option. If your partnership were to sell its
assets and liquidate, you and your partners would not need to rely upon
capitalization of income or other valuation methods to estimate the fair
market value of your partnership's assets. Instead, such assets would be
valued through negotiations with prospective purchasers. However, a
liquidating sale of your partnership's property would be a taxable event
for you and your partners and could result in significant amounts of
taxable income to you and your partners. Another option for liquidation of
your
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investment would be to sell your units in a private transaction. Any such
sale could be at a very substantial discount from your pro rata share of
the fair market value of your partnership's property and might involve
significant expense and delay.
Continuation of Your Partnership Without the Offer. A second alternative
would be for your partnership to continue its business without our offer. A
number of advantages could result from the continued operation of your
partnership. Given improving rental market conditions, the level of
distributions might increase over time. We believe it is possible that the
private resale market for apartment and retail properties could improve
over time, making a sale of your partnership's property in a private
transaction at some point in the future a more viable option than it is
currently. However, there are several risks and disadvantages that result
from continuing the operations of your partnership without the offer. Your
partnership faces maturity or balloon payment dates on its mortgage loans
and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, it could be
forced to borrow on terms that could result in net losses from operations.
In addition, continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner expects to
result from the offer. For example, a partner of your partnership would
have no opportunity for liquidity unless he were to sell his units in a
private transaction. Any such sale would likely be at a very substantial
discount from the partner's pro rata share of the fair market value of your
partnership's property.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership for cash
or for units in the AIMCO Operating Partnership.
There are four principal advantages of exchanging your units for
Tax-Deferral % Preferred OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral % Preferred OP Units and receive, at our
option, shares of AIMCO's Class I Preferred Stock, shares of AIMCO's
Class A Common Stock or cash. AIMCO's Class A Common Stock is, and
AIMCO's Class I Preferred Stock is expected to be, listed and traded on
the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral % Preferred OP
Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Tax-Deferral % Preferred OP
Units before any distributions are paid to holders of Tax-Deferral Common
OP Units. However, one class of outstanding Partnership Preferred Units
has prior distribution rights and the Tax-Deferral % Preferred OP Units
rank equal to six other outstanding classes of Partnership Preferred
Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of exchanging your units for
Tax-Deferral Common OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Tax-Deferral Common OP Units and receive, at our option,
shares of AIMCO's Class A Common Stock (on a one-for-one basis, subject
to adjustment in certain circumstances) or an equivalent amount of cash.
AIMCO's Class A Common Stock is listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Tax-Deferral Common OP Units.
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- Quarterly Distributions. We pay quarterly distributions on the
Tax-Deferral Common OP Units. For the quarter ended June 30, 1998, we
paid distributions of $0.5625 on each of the Tax-Deferral Common OP Units
(equivalent to $2.25 on an annual basis).
- Growth Potential. Our assets, organizational structure and access to
capital enables us to pursue acquisition and development opportunities
that are not available to your partnership. You would have the
opportunity to participate in the growth of our enterprise and would
benefit from any future increase in the AIMCO stock price and from any
future increase in distributions on the Tax-Deferral Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of the offer, see "Risk Factors."
TERMS OF THE OFFER
General. We are offering to acquire up to % of the outstanding units
of your partnership for consideration per unit of Tax-Deferral %
Preferred OP Units, Tax-Deferral Common OP Units, or $ in cash. If
you tender units pursuant to the offer, you may chose to receive any combination
of such forms of consideration for your units. The offer is made upon the terms
and subject to the conditions set forth in this Prospectus Supplement, the
accompanying Prospectus and the accompanying Letter of Transmittal, including
the instructions thereto, as the same may be supplemented or amended from time
to time (the "Letter of Transmittal"). To be eligible to receive Tax-Deferral
% Preferred OP Units, Tax-Deferral Common OP Units or cash pursuant to the
offer, you must validly tender and not withdraw your units on or prior to the
Expiration Date. For administrative purposes, the transfer of units tendered
pursuant to the offer will be deemed to take effect as of , 1998.
Expiration Date. Our offer will expire at 5:00 P.M., Denver, Colorado time,
on , 1998, unless extended.
Conditions of the Offer. Our offer is not conditioned on the tender of any
minimum number of units. However, our offer is conditioned on a number of other
factors.
Procedures for Tendering. If you desire to accept our offer, you must
complete and sign the Letter of Transmittal in accordance with the instructions
contained therein and forward or hand deliver it, together with any other
required documents, to the Information Agent (as defined below), either with
your units to be tendered or in compliance with the specified procedures for
guaranteed delivery of units. If you have units registered in the name of a
broker, dealer, commercial bank, trust company, custodian or nominee and you
wish to tender any units pursuant to the offer, you are urged to contact such
person promptly.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds % of the outstanding units, upon the terms
and subject to the conditions of the offer, we will accept all units properly
tendered and not withdrawn prior to the Expiration Date on a pro rata basis. In
the event that proration of tendered units is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Withdrawal Rights. You may withdraw your tender of units pursuant to the
offer at any time prior to the expiration date of our offer, and unless already
accepted for payment as provided for herein, you may withdraw your tender of
units, pursuant to the offer on and after , 199 .
Purpose of the Offer. The purpose of our offer is to provide us with an
opportunity to increase our investment in apartment properties, and provide you
and your partners with an opportunity to liquidate your current investment and
to invest in our operating partnership or receive cash, or to retain your units.
Fractional OP Units. We will issue fractional Tax-Deferral Common OP Units
or Tax-Deferral % Preferred OP Units, if necessary.
S-14
<PAGE> 2057
Delivery of OP Units and Cash. We will deliver OP Units and cash as soon as
practicable after acceptance of units for purchase.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer (the "Information Agent"). Its
telephone number is (888) 349-2005 or (201) 896-1900.
Extension; Termination; Amendment. We expressly reserve the right, in our
sole discretion, at any time and from time to time, to:
- extend the period of time during which the offer is open and thereby
delay acceptance of, and payment for, any tendered units;
- terminate the offer and not accept for payment any units not theretofore
accepted for payment or paid for;
- upon the failure to satisfy any of the conditions to the offer, delay the
acceptance of, or payment for, any units not already accepted for payment
or paid for; and
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
Effects of the Offer. As a result of the offer, we, in our capacity as a
limited partner of your partnership, will participate in any subsequent
distributions to limited partners, to the extent of units we purchase pursuant
to the offer. The offer will not affect the operation of your partnership's
property because your general partner and the property manager of your
partnership's property will remain unchanged.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
amount of units pursuant to the offer, we may be in a position to influence
voting decisions with respect to your partnership.
Future Plans for Your Partnership. We currently intend that, upon
consummation of the offer, your partnership will continue its business and
operations substantially as they are currently being conducted. We do not have
any present plans or proposals which relate to or would result in any material
changes in your partnership's structure or business. We have no present
intention to cause your partnership to sell its property or to prepay the
current mortgage within any specified time period.
Certain Legal Matters. Except as set forth in this section, we are not,
based on information provided by your general partner, aware of any licenses or
regulatory permits that would be material to the business of your partnership,
and that might be adversely affected by our acquisition of units as contemplated
herein. On the same basis, we are not aware of any filings, approvals or other
actions by or with any domestic or foreign governmental authority or
administrative or regulatory agency that would be required prior to our
acquisition of units pursuant to the offer as contemplated herein that have not
been made or obtained. We are not aware of any jurisdiction in which the making
of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, we will make a good faith effort to comply with any such law.
Fees and Expenses. We will not pay any fees or commissions to any broker,
dealer or other person for soliciting tenders of units pursuant to the offer. We
will pay the Information Agent reasonable and customary compensation for its
services in connection with the offer, plus reimbursement for out-of-pocket
expenses. We will indemnify the Information Agent against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. We will pay all costs and expenses of printing and mailing this
Prospectus Supplement and the accompanying Prospectus and the legal fees and
expenses in connection therewith. We will also pay the fees of Stanger for
providing the fairness opinions for the offer. We estimate that our total costs
and expenses in making the offer (excluding the purchase price of the units
payable to you and your partners) will be approximately $ .
Accounting Treatment. Upon consummation of the offer, we will account for
our investment in any acquired units under the purchase method of accounting.
There will be no effect on the accounting treatment of your partnership as a
result of the offer.
S-15
<PAGE> 2058
CERTAIN FEDERAL INCOME TAX MATTERS
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Tax-Deferral
% Preferred OP Units or Tax-Deferral Common OP Units. You will recognize a
gain or loss for Federal income tax purposes on units you sell for cash. The
exchange of your units for cash and OP Units will be treated, for Federal income
tax purposes, as a partial sale of such units for cash and as a partial tax-free
contribution of such units to our operating partnership.
THIS SUMMARY IS A GENERAL DISCUSSION OF CERTAIN OF THE ANTICIPATED FEDERAL
INCOME TAX CONSEQUENCES OF TENDERING UNITS IN THE OFFER. THIS SUMMARY DOES NOT
DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN
LIGHT OF YOUR SPECIFIC CIRCUMSTANCES OR IF YOU ARE SUBJECT TO SPECIAL TREATMENT
UNDER THE FEDERAL INCOME TAX LAWS. THE PARTICULAR TAX CONSEQUENCES OF THE OFFER
TO YOU WILL DEPEND ON A NUMBER OF FACTORS RELATED TO YOUR TAX SITUATION. YOU
SHOULD REVIEW "CERTAIN FEDERAL INCOME TAX MATTERS" IN THIS PROSPECTUS SUPPLEMENT
AND "FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS," "FEDERAL INCOME
TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNITHOLDERS" AND "OTHER TAX
CONSEQUENCES" IN THE ACCOMPANYING PROSPECTUS AND CONSULT YOUR TAX ADVISORS FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO YOU OF THE OFFER.
VALUATION OF UNITS
We determined the offer consideration by estimating the proceeds that you
would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely-
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our offer consideration. We determined our offer consideration as
follows:
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)...................... %
Aggregate gross valuation of your partnership's
properties................................................ $
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures and deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to holders of
units.....................................................
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
===========
</TABLE>
S-16
<PAGE> 2059
In order to determine the number of Tax-Deferral % Preferred OP Units
we are offering for each of your units, we divided the cash offer consideration
by the $100 liquidation preference of each Preferred OP Unit to get per
unit.
In order to determine the number of Tax-Deferral Common OP Units we are
offering for each of your units, we divided the cash offer consideration by
$ to get per unit. This price represents the closing price of AIMCO's
Class A Common Stock on the NYSE on a recent date before we commenced this
offer.
FAIRNESS OF THE OFFER
Fairness to Unitholders. We have a majority ownership interest in your
general partner. As a result, your general partner has a conflict of interest
and makes no recommendation to you as to whether you should tender or refrain
from tendering your units. We have retained Stanger to conduct an analysis of
the offer and to render an opinion as to the fairness to you of our offer
consideration. Stanger is not affiliated with us or your general partner.
Stanger is one of the leaders in the field of analyzing and evaluating complex
real estate transactions. However, we provided much of the information used by
Stanger in forming its fairness opinion. We believe the information provided to
Stanger is accurate in all material respects. You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
The terms of our offer have been established by us and are not the result
of arms-length negotiations.
If you choose not to tender any units, your interest in your partnership
will remain unchanged, except that we may own a larger share of the limited
partnership interests in your partnership than we did before the offer. If we
acquire a substantial number of units pursuant to the offer, we may be in a
position to influence voting decisions with respect to your partnership. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership's property within any specified time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner has compared our cash offer consideration to:
- prices at which the units have been sold in the illiquid secondary
market, where information concerning such transactions is known to the
general partner; and
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer consideration.................................... $
Alternatives:
Prices on secondary market................................ $3.42 to $55.00
Estimated liquidation proceeds............................ $
</TABLE>
STANGER ANALYSIS
We engaged Stanger to conduct an analysis of our offer and to render its
opinion based on the review, analysis, scope and limitations described therein,
as to the fairness to you of our offer consideration from a financial point of
view. The full text of the opinion, which contains a description of the
assumptions and qualifications made, matters considered and limitations on the
review and analysis, is set forth in Appendix A and should be read in its
entirety. We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. We have agreed to indemnify Stanger against
certain liabilities arising out of its engagement to render the fairness
opinion. Based on its analysis, and subject to the assumptions, limitations and
qualifications cited in its opinion, Stanger concluded that our offer
consideration is fair to you from a financial point of view.
S-17
<PAGE> 2060
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
There are a number of significant differences between your partnership and
the AIMCO Operating Partnership relating to, among other things, form of
organization, permitted investments, policies and restrictions, management
structure, compensation and fees, and investor rights. For example, the general
partner of your partnership may be removed by the limited partners while the
limited partners of the AIMCO Operating Partnership cannot remove the general
partner. Also, your partnership is limited as to the number of limited
partnership units it may issue while the AIMCO Operating Partnership has no such
limitation.
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units,
Tax-Deferral % Preferred OP Units and Tax-Deferral Common OP Units relating
to, among other things, the nature of the investment, voting rights,
distributions and liquidity and transferability/redemption. For example, unlike
the AIMCO OP Units, you have no redemption rights with respect to your units.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
affiliated with us and, therefore, has substantial conflicts of interest with
respect to the offer, including (i) the fact that replacement of your general
partner could result in a decrease or elimination of the management fees paid to
an affiliate for managing your partnership's property and (ii) our desire to
purchase units at a low price and your desire to sell units at a high price.
Your general partner makes no recommendation as to whether you should tender or
refrain from tendering your units.
Conflicts of Interest that Currently Exist for Your Partnership. We own a
majority of both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives an
annual management fee up to 9% of Distributed Cash From Operations (as defined
in your partnership's agreement of limited partnership) for its services as
general partner of your partnership and may also receive reimbursement for
expenses incurred in such capacity. The general partner of your partnership
received total fees and reimbursement of $59,000 for the first six months of
1998. The property manager received management fees of $116,000 for the first
six months of 1998. We have no current intention of changing the fee structure
for your property manager.
Competition Among Properties. Your partnership's properties and other
properties owned or managed by us may compete with one another for tenants.
However, in some cases it may be difficult to determine precisely the confines
of the market area for particular properties and some competition may exist.
Furthermore, you should bear in mind that we anticipate acquiring properties in
general market areas where your partnership's property is located. It is
believed that this concentration of properties in a general market area will
facilitate overall operations through collective advertising efforts, staffing
and other operational efficiencies. In managing our properties, we will attempt
to reduce such conflicts between competing properties by referring prospective
tenants to the property considered to be most conveniently located for the
tenants' needs.
Features Discouraging Potential Takeovers. Certain provisions of our
governing documents, as well as statutory provisions under certain state laws,
could be used by our management to delay, discourage or thwart efforts of third
parties to acquire control of us, or a significant equity interest in us.
Future Exchange Offers. Although we have no current plans to conduct
further exchange offers for your units, our plans may change based on future
circumstances. Any such future offers that we might make could be for
consideration that is more or less than the consideration we are currently
offering. If the results of operations were to improve for your partnership
under our management, we might be required to pay a higher price for any future
exchange offers we may make for units of your partnership.
YOUR PARTNERSHIP
Consolidated Capital Properties V was organized on June 30, 1983, under the
laws of the State of California. Its primary business is real estate ownership
and related operations. Your partnership was formed
S-18
<PAGE> 2061
for the purpose of making investments in various types of real properties
which offer potential capital appreciation and cash distributions to its limited
partners. Your partnership's investment portfolio currently consists of the
following three properties: Aspen Ridge Apartments, a 253-unit complex in West
Chicago, Illinois; Sutton Place Apartments, a 201-unit complex in Corpus
Christi, Texas; and 51 North High Building, a 86,000 square-foot office building
in Columbus, Ohio. The general partner of your partnership is ConCap Equities,
Inc., which is a majority-owned subsidiary of AIMCO. A majority-owned subsidiary
of AIMCO serves as manager of the properties owned by your partnership. As of
September 15, 1998, there were 179,537.20 units of limited partnership interest
issued and outstanding, which were held of record by 3,897 limited partners.
Your partnership's principal executive offices are located at 1873 South
Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone number at
that address is (303) 757-8101. For additional information about your
partnership, please refer to the annual and quarterly reports prepared by your
partnership which accompany this Prospectus Supplement.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $ will be required to purchase
all of the units sought in our offer, if such units are tendered for cash. We
will obtain all such funds from cash from operations, equity issuances and short
term borrowings.
S-19
<PAGE> 2062
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
six months ended June 30, 1998 and 1997 is unaudited. The historical summary
financial data for AIMCO Properties, L.P. for the years ended December 31, 1997,
1996 and 1995 and for the AIMCO Properties, L.P. Predecessors for the period
January 10, 1994 through July 28, 1994, and the year ended December 31, 1993, is
based on audited financial statements. This information should be read in
conjunction with such financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in AIMCO Properties, L.P.'s Registration Statement on Form
10, as amended, which is incorporated by reference herein. All dollar values are
in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 161,264 $ 79,719 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses...... (59,643) (31,160) (76,168) (38,400) (30,150) (10,330)
Owned property management
expenses....................... (4,713) (2,734) (6,620) (2,746) (2,276) (711)
Depreciation..................... (34,289) (15,046) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
62,619 30,779 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 9,562 5,605 13,937 8,367 8,132 3,217
Management and other expenses.... (5,470) (2,643) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation.... (196) (294) (588) (590) (581) --
Other assets, depreciation and
amortization................... (3) (161) (453) (218) (168) (150)
Owner and seller bonuses......... -- -- -- -- -- --
Amortization of management
company goodwill............... -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
3,893 2,507 2,038 1,707 2,002 1,020
Minority interests in service
company business............... (1) (2) (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business....... 3,892 2,505 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative
expenses....................... (4,103) (784) (5,396) (1,512) (1,804) (977)
Interest income.................. 11,350 1,341 8,676 523 658 123
Interest expense................. (34,778) (20,604) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships................... (516) (565) 1,008 (111) -- --
Equity in losses of
unconsolidated
partnerships(c)................ (4,681) (379) (1,798) -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ 5,609 (86) 4,636 -- -- --
Amortization of goodwill......... (3,394) (474) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations........... 35,998 11,733 30,246 15,629 14,988 7,702
Gain on disposition of
properties..................... 2,526 -- 2,720 44 -- --
Provision for income taxes....... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before
extraordinary item............. 38,524 11,733 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt......... -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)................ $ 38,524 $ 11,464 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 210 107 147 94 56 48
Total owned apartment units (end
of period)..................... 58,345 27,056 40,039 23,764 14,453 12,513
Units under management (end of
period)........................ 68,248 70,213 69,587 19,045 19,594 20,758
Basic earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP
Unit........................... $ 0.61 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit........................... $ 1.125 $ 0.925 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities..................... 5,838 25,035 73,032 38,806 25,911 16,825
Cash flows used in investing
activities....................... (100,669) (108,134) (717,663) (88,144) (60,821) (186,481)
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income.......... $ 5,805 $ 8,056
Property operating expenses...... (2,263) (3,200)
Owned property management
expenses....................... -- --
Depreciation..................... (1,151) (1,702)
------- --------
2,391 3,154
------- --------
SERVICE COMPANY BUSINESS:
Management fees and other
income......................... 6,533 8,069
Management and other expenses.... (5,823) (6,414)
Corporate overhead allocation.... -- --
Other assets, depreciation and
amortization................... (146) (204)
Owner and seller bonuses......... (204) (468)
Amortization of management
company goodwill............... -- --
------- --------
360 983
Minority interests in service
company business............... -- --
------- --------
Company's shares of income from
service company business....... 360 983
------- --------
General and administrative
expenses....................... -- --
Interest income.................. -- --
Interest expense................. (4,214) (3,510)
Minority interest in other
partnerships................... -- --
Equity in losses of
unconsolidated
partnerships(c)................ -- --
Equity in earnings of
unconsolidated
subsidiaries(d)................ -- --
Amortization of goodwill......... -- --
------- --------
Income from operations........... (1,463) 627
Gain on disposition of
properties..................... -- --
Provision for income taxes....... (36) (336)
------- --------
Income (loss) before
extraordinary item............. (1,499) 291
Extraordinary item -- early
extinguishment of debt......... -- --
------- --------
Net income (loss)................ $(1,499) $ 291
======= ========
OTHER INFORMATION:
Total owned properties (end of
period)........................ 4 4
Total owned apartment units (end
of period)..................... 1,711 1,711
Units under management (end of
period)........................ 29,343 28,422
Basic earnings per Common OP
Unit........................... N/A N/A
Diluted earnings per Common OP
Unit........................... N/A N/A
Distributions paid per Common OP
Unit........................... N/A N/A
Cash flows provided by operating
activities..................... 2,678 2,203
Cash flows used in investing
activities....................... (924) (16,352)
</TABLE>
S-20
<PAGE> 2063
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE SIX MONTHS FOR THE YEAR ENDED 1994
ENDED JUNE 30, DECEMBER 31, THROUGH
----------------------- -------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
---------- ---------- ---------- -------- -------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
financing activities............. $ 107,063 $ 91,450 $ 668,549 $ 60,129 $ 30,145 $ 176,800
Funds from operations(e)........... 83,657 28,441 81,155 35,185 25,285 9,391
Weighted average number of Common
OP Units outstanding............. 51,478 21,590 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $2,585,204 $1,102,073 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation..................... 2,287,309 945,969 1,503,922 745,145 448,425 392,368
Total assets....................... 3,054,741 1,272,890 2,100,510 827,673 480,361 416,361
Total mortgages and notes
payable.......................... 1,314,475 644,457 808,530 522,146 268,692 141,315
Redeemable Partnership Units....... 238,639 94,777 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- -- -- -- -- 107,228
Partners' Capital.................. 1,290,719 357,066 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.'S
PREDECESSORS(a)
--------------------------
FOR THE
PERIOD
JANUARY 10,
1994 FOR THE YEAR
THROUGH ENDED
JULY 28, DECEMBER 31,
1994(b) 1993
----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C>
Cash flows provided by (used in)
financing activities............. $(1,032) $ 14,114
Funds from operations(e)........... N/A N/A
Weighted average number of Common
OP Units outstanding............. N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation..................... $47,500 $ 46,819
Real estate, net of accumulated
depreciation..................... 33,270 33,701
Total assets....................... 39,042 38,914
Total mortgages and notes
payable.......................... 40,873 41,893
Redeemable Partnership Units....... -- --
Mandatorily redeemable 1994
Cumulative Senior Preferred
Units............................ -- --
Partners' Capital.................. (9,345) (7,556)
</TABLE>
----------------
(a) On July 29, 1994, AIMCO completed its initial public offering of 9,075,000
shares of AIMCO Class A Common Stock and issued 966,000 shares of
convertible preferred stock and 513,514 unregistered shares of AIMCO Common
Stock. The proceeds from the offering and such other issuances were
contributed by AIMCO to AIMCO Properties, L.P. for 9,075,000 OP Units,
966,000 Preferred Units and 513,514 Common OP Units, respectively. On such
date, AIMCO Properties, L.P. and its predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO Properties, L.P. to continue and expand the property management and
related businesses of its predecessors. The 966,000 shares of convertible
preferred stock and 513,514 shares of AIMCO Class A Common Stock that were
issued concurrently with the initial public offering were repurchased in
1995.
(b) Represents the period January 1, 1994 through July 28, 1994, the date of
the completion of the business combination with AIMCO Properties, L.P.
(c) Represents AIMCO Properties, L.P.'s share of earnings from partnerships
that own 83,431 apartment units in which partnerships AIMCO Properties,
L.P. purchased an equity interest from the NHP Real Estate Companies.
(d) Represents AIMCO Properties, L.P. equity earnings in unconsolidated
subsidiaries.
(e) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO", when considered with the financial data
determined in accordance with GAAP, provides a useful measure of
performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO
consistent with the NAREIT definition, plus amortization of management
company goodwill, the non-cash deferred portion of the income tax provision
for unconsolidated subsidiaries and less the payments of dividends on
perpetual preferred stock. AIMCO Properties, L.P. management believes that
presentation of FFO provides investors with industry-accepted measurements
which help facilitate an understanding of its ability to make required
dividend payments, capital expenditures and principal payments on its debt.
There can be no assurance that AIMCO Properties, L.P.'s basis of computing
FFO is comparable with that of other REITs.
The following is a reconciliation of net income to funds from operations:
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEAR ENDED JANUARY 10,
ENDED JUNE 30, DECEMBER 31, 1994
----------------- --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $38,524 $11,464 $32,697 $15,673 $14,988 $ 7,702
Gain on disposition of property............................. (2,526) -- (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 32,423 13,250 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 4,727 474 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 1,263 3,584 -- -- --
Amortization of management contracts...................... 3,088 150 1,587 -- -- --
Deferred taxes............................................ 4,291 874 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 9,131 697 6,280 -- -- --
Preferred stock dividends................................. (6,001) -- (135) -- (5,169) (3,114)
------- ------- ------- ------- ------- -------
Funds from operations....................................... $83,657 $28,441 $81,155 $35,185 $25,285 $ 9,391
======= ======= ======= ======= ======= =======
</TABLE>
S-21
<PAGE> 2064
SUMMARY PRO FORMA FINANCIAL AND OPERATING INFORMATION OF AIMCO PROPERTIES, L.P.
The following table sets forth summary pro forma financial and operating
information of AIMCO Properties, L.P. for the six months ended June 30, 1998 and
for the year ended December 31, 1997. The pro forma financial and operating
information gives effect to AIMCO's merger with Insignia Financial Group, Inc.,
the transfer of certain assets and liabilities of Insignia to unconsolidated
subsidiaries, a number of transactions completed before the Insignia merger, and
a number of exchange offers proposed to be made to limited partnerships formerly
controlled or managed by Insignia, including your partnership.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
---------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 206,931 $ 402,202
Property operating expenses............................... (78,825) (169,166)
Owned property management expenses........................ (4,880) (10,412)
Depreciation.............................................. (45,728) (87,246)
---------- ---------
77,498 135,378
---------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 19,525 41,676
Management and other expenses............................. (9,660) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (7,223) (21,841)
---------- ---------
2,446 (4,436)
Minority interests in service company business............ (1) (10)
---------- ---------
Partnership's shares of income from service company
business............................................... 2,445 (4,446)
---------- ---------
General and administrative expenses....................... (4,678) (21,228)
Interest income........................................... 15,781 21,543
Interest expense.......................................... (56,823) (105,763)
Minority interest......................................... (6,103) (9,662)
Equity in losses of unconsolidated partnerships........... (11,726) (46,832)
Equity in earnings of unconsolidated subsidiaries......... 1,996 2,344
Amortization of Goodwill.................................. (3,394) --
---------- ---------
Net income........................................ $ 14,996 $ (28,666)
========== =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (0.04) $ (0.95)
Diluted earnings (loss) per Common OP Unit.................. $ (0.04) $ (0.95)
Distributions paid per Common OP Unit....................... $ 1.125 $ 1.85
CASH FLOW DATA:
Cash provided by operating activities(a).................... $ 89,883 $ 140,072
Cash used by investing activities(b)........................ (8,942) (17,884)
Cash used by financing activities(c)........................ (100,338) (171,576)
OTHER DATA:
Funds from operations(d).................................... $ 126,541 $ 181,095
Weighted average number of Common OP Units outstanding...... 71,946 70,311
</TABLE>
S-22
<PAGE> 2065
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, before accumulated depreciation................ $2,669,776
Real estate, net of accumulated depreciation................ 2,371,881
Total assets................................................ 4,180,507
Total mortgages and notes payable........................... 1,610,711
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 302,937
Partners' capital........................................... 1,898,443
</TABLE>
- ---------------
(a) Pro forma cash provided by operating activities represents net income, plus
depreciation and amortization less the non-cash portion of AIMCO Properties
L.P.'s equity in earnings of unconsolidated subsidiaries. The pro forma
amounts do not include adjustments for changes in working capital resulting
from changes in current assets and current liabilities as there is no
historical data available as of both the beginning and end of each period
presented.
(b) On a pro forma basis, cash used in investing activities represents the
minimum annual provision for capital replacements of $300 per owned
apartment unit.
(c) Pro forma cash used in financing activities represents (i) estimated
distributions to be paid based on AIMCO Properties, L.P.'s historical
distribution rate of $1.125 per Common OP Unit for the six months ended
June 30, 1998 and $1.85 per Common OP Unit for the year ended December 31,
1997, on outstanding Common OP Units, (ii) estimated distributions to be
paid based on the rate of $3.5625 per unit for the six months ended June
30, 1998 and $7.125 per unit for the year ended December 31, 1997 on
outstanding Class B Partnership Preferred Units, (iii) estimated
distributions to be paid based on the rate of $1.125 per unit for the six
months ended June 30, 1998 and $2.25 per unit for the year ended December
31, 1997 on outstanding Class C Partnership Preferred Units, (iv) estimated
distributions to be paid based on the rate of $1.095 per unit for the six
months ended June 30, 1998 and $2.19 per unit for the year ended December
31, 1997 on outstanding Class D Partnership Preferred Units, (v) estimated
distributions to be paid based on the rate of $1.1718 per unit for the six
months ended June 30, 1998 and $2.34375 per unit for the year ended
December 31, 1997 on outstanding Class G Partnership Preferred Units, and
(vi) estimated distributions to be paid based on the rate of $1.1875 per
unit for the six months ended June 30, 1998 and $2.375 per unit for the
year ended December 31, 1997 on outstanding Class H Partnership Preferred
Units.
(d) AIMCO Properties, L.P.'s management believes that the presentation of funds
from operations or "FFO," when considered with the financial data
determined in accordance with GAAP, provides useful measures of AIMCO
Properties, L.P. performance. However, FFO does not represent cash flow and
is not necessarily indicative of cash flow or liquidity available to AIMCO
Properties, L.P., nor should it be considered as an alternative to net
income as an indicator of operating performance. The Board of Governors of
NAREIT defines FFO as net income (loss), computed in accordance with GAAP,
excluding gains and losses from debt restructuring and sales of property,
plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures. AIMCO Properties, L.P. calculates FFO in a
manner consistent with the NAREIT definition, plus amortization of
management company goodwill, the non-cash deferred portion of the income
tax provision for unconsolidated subsidiaries and less the payments of
dividends on perpetual preferred stock. AIMCO Properties, L.P. management
believes that presentation of FFO provides investors with an industry
accepted measurement which helps facilitate an understanding of AIMCO
Properties, L.P.'s ability to make required dividend payments, capital
expenditures and principal payments on its debt. There can be no assurance
that AIMCO Properties, L.P.'s basis of computing FFO is comparable with
that of other REITs.
S-23
<PAGE> 2066
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
ACCOUNT JUNE 30, 1998 DECEMBER 31, 1997
------- ---------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss).................................. $ 14,996 $(28,666)
HUD release fee and legal reserve.................. -- 10,202
Real estate depreciation, net of minority
interests........................................ 43,391 81,936
Amortization of management contracts............... 5,773 11,546
Amortization of management company goodwill........ 4,466 8,930
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation......................... -- 1,715
Amortization of management company goodwill...... 959 1,918
Amortization of management contracts............. 15,345 29,951
Deferred taxes................................... 1,572 (397)
Equity in earnings of other partnerships:
Real estate depreciation......................... 60,158 104,177
Interest on convertible debentures................. (5,012) (10,003)
Preferred unit distributions....................... (15,107) (30,214)
-------- --------
Funds from operations.............................. $126,541 $181,095
======== ========
</TABLE>
S-24
<PAGE> 2067
SUMMARY FINANCIAL INFORMATION OF CONSOLIDATED CAPITAL PROPERTIES V
The summary financial information of Consolidated Capital Properties V for
the six months ended June 30, 1998 and 1997 is unaudited. The summary financial
information for Consolidated Capital Properties V for the years ended December
31, 1997, 1996, and 1995 is based on audited financial statements. This
information should be read in conjunction with such financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
CONSOLIDATED CAPITAL PROPERTIES V
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
In thousands, except unit data
OPERATING DATA:
Total Revenues....................................... $ 2,227 $ 2,214 $ 4,424 $ 4,152 $ 5,008
Net Income (Loss).................................... (100) (100) (411) (877) (2,067)
Net Income (Loss) per limited partnership unit....... (0.56) (0.56) (2.28) (6.40) (11.49)
Distributions per limited partnership unit........... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------- ---------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real Estate, Net of Accumulated Depreciation......... $ 6,665 $ 7,004 $ 6,936 $ 7,291 $ 8,140
Total Assets......................................... 8,513 9,093 8,816 9,260 10,135
Notes Payable........................................ 11,078 11,210 11,145 11,294 10,925
Partners' Capital (Deficit).......................... (3,274) (2,863) (3,174) (2,763) (1,611)
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per Common OP Unit and
historical cash distributions per unit of your partnership.
<TABLE>
<CAPTION>
AIMCO OPERATING CONSOLIDATED CAPITAL
PARTNERSHIP PROPERTIES V
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash distributions per unit outstanding........... $1.125 $1.85 $0.00 $0.00
</TABLE>
S-25
<PAGE> 2068
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of Apartment Investment and Management
Company or "AIMCO." AIMCO is a real estate investment trust that owns and
manages multifamily apartment properties throughout the United States. As of
October 1, 1998, AIMCO, through its wholly owned subsidiaries, AIMCO-GP, Inc.,
the sole general partner of the AIMCO Operating Partnership (the "AIMCO GP"),
and AIMCO-LP, Inc., a limited partner in the AIMCO Operating Partnership (the
"Special Limited Partner"), held approximately an 89% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled as of January 1,
1998 by the National Multi Housing Council, we believe that, as of October 1,
1998, AIMCO was the largest owner and manager of multifamily apartment
properties in the United States, with a total portfolio of 396,090 apartment
units in 2,303 properties located in 49 states, the District of Columbia and
Puerto Rico. As of October 1, 1998, AIMCO:
- owned or controlled 58,495 units in 209 apartment properties;
- held an equity interest in 239,879 units in 1,335 apartment properties;
and
- managed 97,716 units in 759 apartment properties for third party owners
and affiliates.
The principal executive offices of AIMCO, the AIMCO GP, the Special Limited
Partner and the AIMCO Operating Partnership are located at 1873 South Bellaire
Street, Denver, Colorado 80222, and their telephone number is (303) 757-8101.
RISK FACTORS
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
NO THIRD PARTY VALUATION OR APPRAISAL; NO ARMS-LENGTH NEGOTIATION AND NO
GENERAL PARTNER RECOMMENDATION. We did not base our valuation of the your
partnership's property on any third-party appraisal or valuation. We established
the terms of our offer, including the exchange ratios and the cash
consideration. Such terms are not the result of arms-length negotiations. It is
uncertain whether our offer consideration reflects the value which would be
realized upon a sale of your units or a liquidation of your partnership's
assets. Because of our affiliation with your general partner, your general
partner makes no recommendation to you as to whether you should tender your
units. Based on information recorded by the general partner of your partnership,
we believe that sales prices for your units have ranged from $3.42 per unit to
$55.00 per unit for the period from January 1, 1997 to September 30, 1998. As of
June 30, 1998, your general partner estimated the net asset value of your units
to be $49.00 per unit. However, we do not believe that these valuations
represent the current fair market value of your units. We have retained Stanger
to conduct an analysis of our offer and to render an opinion as to the fairness
to you of our offer consideration from a financial point of view.
OFFER PRICE MAY NOT REPRESENT FUTURE LIQUIDATION VALUE. Your partnership's
properties may outperform our larger, more diversified portfolio of assets.
Although we cannot predict the future value of your partnership's properties,
our offer consideration could be less than the net proceeds that you would
realize upon a future liquidation of your partnership. Accordingly, although
there can be no assurance, you might receive more consideration if you do not
tender your units and, instead, continue to hold your units and ultimately
receive proceeds from a liquidation of your partnership. However, you may prefer
to receive our offer consideration now rather than wait for uncertain future net
liquidation proceeds. As of June 30, 1998, an affiliate of your general partner
estimated the net liquidation value of your units to be $48.77 per unit.
However, we do not believe that this valuation represents the current fair
market value of your units. Furthermore, your general partner has no present
intention to liquidate your partnership, and your partnership's agreement of
limited partnership does not require a sale of your partnership's properties by
any particular date.
S-26
<PAGE> 2069
ATTRACTIVE INVESTMENT FOR THE AIMCO OPERATING PARTNERSHIP. We are making
our offer with a view to making a profit. Accordingly, there is a conflict
between our desire to purchase your units at a low price and your desire to sell
your units at a high price.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and an affiliate of the AIMCO Operating Partnership and,
therefore, has substantial conflicts of interest with respect to our offer.
These conflicts include the fact that a decision of the limited partners of your
partnership to remove, for any reason, your general partner or the manager of
your partnership's property from its current position would result in a decrease
or elimination of the substantial fees paid to your general partner or the
property manager for services provided to your partnership. Your general partner
makes no recommendation to you as to whether you should tender your units. Such
conflicts of interest in connection with our offer and our operation's differ
from those conflicts of interest that currently exist for your partnership.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all rights title and interest
in and to all of the units that we accept, and all distributions in respect of
such units on or after the date on which we accept such units for purchase.
Accordingly, following the purchase of your units, we would be entitled to
receive any future distributions from the operations of your partnership to the
extent of the units we acquire. Similarly, if you tender your units for OP
Units, you will be entitled to future distributions from the operations of the
AIMCO Operating Partnership.
TAX RISKS ASSOCIATED WITH THE OFFER. In general, your exchange of units for
OP Units will not be a taxable transaction. Your sale of units for cash will be
a taxable sale, with the result that you will recognize gain or loss measured by
the difference between the amount realized on the sale and your adjusted tax
basis in the units you transfer to us. Your exchange of units for cash and OP
Units will be treated, for Federal income tax purposes, as a partial taxable
sale of such units for cash and as a partial tax-free contribution of such units
to the AIMCO Operating Partnership. If you exchange your units for cash or for
cash and OP Units, the "amount realized" will be measured by the sum of the cash
you receive plus the portion of your partnership's liabilities allocated to the
units sold for Federal income tax purposes. To the extent that the amount of
cash received plus the allocable share of your partnership's liabilities exceeds
your tax basis in the units sold, you will recognize gain. Consequently, the tax
liability resulting from such gain could exceed the amount of cash received upon
such sale. Although we have no present intention to liquidate or sell your
partnership's property or prepay the current mortgage on your partnership's
property within any specified time period, any such action in the future
generally will require you to fully recognize any deferred taxable gain if you
exchange your units for OP Units. In addition, if the AIMCO Operating
Partnership were to be treated as a "publicly traded partnership" for Federal
income tax purposes, passive activity losses generated by other passive activity
investments held by you, including passive activity loss carryovers attributable
to your units, could not be used to offset your allocable share of income
generated by the AIMCO Operating Partnership. See "Certain Federal Income Tax
Matters." If you redeem OP Units for shares of AIMCO Class A Common Stock or
Preferred Stock, you will recognize gain or loss measured by the difference
between the amount realized from our tender offer and your adjusted tax basis in
the OP Units exchanged. In addition, if you acquire shares of AIMCO stock, you
will no longer be able to use income and loss from your investment to offset
"passive" income and losses from other investments, and the distributions from
AIMCO will constitute taxable income to the extent of AIMCO's earnings and
profits.
This summary is a general discussion of certain of the anticipated Federal
income tax consequences of the offer. This summary does not discuss all aspects
of Federal income taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under the Internal
Revenue Code of 1986, as amended. The particular tax consequences for you of our
offer will depend upon a number of factors related to your tax situation,
including your tax basis in your units, whether you dispose of all of your units
in your partnership and whether you are no longer subject to the "passive loss"
rules with respect to your partnership. Because the income tax consequences of
tendering units will not be the same for everyone, you should consult your own
tax advisor with specific reference to your own tax situation.
S-27
<PAGE> 2070
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE AND TERM OF INVESTMENT. If you exchange your
units for OP Units, you will have changed fundamentally the nature of your
investment. Your partnership owns and manages three properties. In contrast, the
AIMCO Operating Partnership is in the business of acquiring, marketing, managing
and operating a large portfolio of apartment properties. While diversification
of assets may reduce certain risks of investment attributable to a single
property or entity, there can be no assurance as to the value or performance of
our securities or our portfolio of properties as compared to the value of your
units or your partnership. Proceeds of future asset sales or refinancings by the
AIMCO Operating Partnership generally will be reinvested rather than
distributed.
UNCERTAINTY OF PUBLIC TRADING MARKET. Recently, there have been
fluctuations in the trading prices for many REIT securities. There may be
subsequent changes in public market valuations of real estate assets relative to
private market valuations of real estate assets. We cannot predict the price at
which the Class I Preferred Stock or the Class A Common Stock will trade
following the time at which Preferred OP Units or Common OP Units may be
redeemed for shares of Class I Preferred Stock or Class A Common Stock.
Furthermore, the liquidity of the Class I Preferred Stock and the Class A Common
Stock at the time at which OP Units may be redeemed is also uncertain.
COMPANY AUTHORITY. Under our organizational documents, we have the ability
to change our investment, acquisition and financing policies without a vote of
the limited partners of the AIMCO Operating Partnership or the stockholders of
AIMCO. If you tender your units for OP Units, you will have less effective power
in influencing our policies than you currently have in influencing the policies
of your partnership.
RISKS ASSOCIATED WITH AN INVESTMENT IN AIMCO. We face real estate
investment, financing, management, acquisition and development risks, many of
which are similar to the risks currently faced by your partnership, as well as
additional risks. See "Risk Factors" in the accompanying Prospectus.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
LACK OF TRADING MARKET FOR UNITS. There is no established or regular
trading market for your units, nor is there another reliable standard for
determining the fair market value of your units. If you desire or need
liquidity, you may wish to consider our offer. Our offer affords you an
opportunity to dispose of your units for cash, an opportunity which might not be
available to you in the foreseeable future. However, our offer consideration
does not necessarily reflect the price that you would receive in an open market
for your units or upon a liquidation of your partnership's assets. Such prices
may be higher or lower than our offer consideration.
DIFFERENT DISTRIBUTIONS. Anticipated annualized distributions with respect
to the Preferred OP Units are $ , current annualized distributions with
respect to the Common OP Units are $2.25. This is equivalent to distributions of
$ per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP Units,
that you would receive in exchange for each of your partnership's units. Your
partnership has not paid distributions since 1990. Therefore, distributions with
respect to the Preferred OP Units and Common OP Units that we are offering are
expected to be , immediately following our offer, than the distributions
with respect to your units. See "Comparison of Ownership of Your Units and AIMCO
OP Units -- Distributions."
FUTURE CONTROL BY AIMCO. Because your general partner is a subsidiary of
AIMCO, we control the management of your partnership. In addition, if we acquire
more units, we will increase our ability to influence voting decisions with
respect to your partnership. Furthermore, in the event that we acquire a
substantial number of units pursuant to our offer, removal of your general
partner without our consent may become more difficult or impossible. We also own
a majority of the company that manages your partnership's property. In the event
that we acquire a substantial number of units pursuant to our offer, removal of
the property manager without our consent may become more difficult or
impossible.
RECOGNITION OF GAIN RESULTING FROM POSSIBLE FUTURE REDUCTION IN YOUR
PARTNERSHIP LIABILITIES. Generally, a decrease in your share of your
partnership's liabilities is treated, for Federal income tax purposes, as a
S-28
<PAGE> 2071
deemed cash distribution. Although your general partner has no current plan
or intention to reduce the liabilities of your partnership, it is possible that
future economic, market, legal, tax or other considerations may cause your
general partner to reduce the liabilities of your partnership. If the
liabilities of your partnership were to be reduced, and you do not tender all of
your units pursuant to our offer, you will be treated as receiving a
hypothetical distribution of cash resulting from a decrease in your share of the
liabilities of your partnership. Any such hypothetical distribution of cash
would be treated as a nontaxable return of capital to the extent of your
adjusted tax basis in your units and thereafter as gain.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership restricts you from making any transfer that
would cause 50% or more of the total interest in your partnership to be
transferred within a 12-month period. If we acquire a significant interest in
your partnership, through this offer, you may not be able to transfer your units
for the 12-month period after our offer.
MOODY'S NEGATIVE OUTLOOK FOR AIMCO RATINGS. Recently, Moody's Investors
Service revised its outlook for our ratings from stable to negative to reflect
its concerns surrounding our ability to successfully implement our financial
strategy while maintaining a prudent capital structure as a result of more
difficult general capital market conditions. Moody's noted that our access to
the public markets may prove challenging in light of the volatility in both the
equity and capital markets for REITs and assigned a "ba3" rating to a class of
preferred stock proposed to be issued by us. Moody's indicated that its rating
action reflects our increasing leveraged profile, including high levels of
secured debt and preferred stock, limited financial flexibility and integration
risks resulting from the merger with Insignia. Moody's also noted our high level
of encumbered properties and material investments in loans to highly leveraged
partnerships in which we own a general partnership interest. At the same time,
Moody's, Standard & Poor's and Duff & Phelps confirmed its existing ratings on
our preferred stock and senior debt.
BACKGROUND AND REASONS FOR THE OFFER
BACKGROUND OF THE OFFER
General
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's property while providing you and other investors with an
opportunity to retain or liquidate your investment in your partnership by
tendering for OP Units or for cash.
On October 1, 1998, AIMCO merged (the "Insignia Merger") with Insignia
Financial Group, Inc. ("Insignia"). As a result of the Insignia Merger, AIMCO
acquired approximately 51% of the outstanding common shares of beneficial
interest of Insignia Properties Trust ("IPT"). The general partner of your
partnership is a wholly owned subsidiary of IPT. Through the Insignia Merger,
AIMCO also acquired a majority ownership interest in an entity that manages the
properties owned by your partnership. Through subsidiaries, AIMCO currently
owns, in the aggregate, approximately a 26.18% interest in your partnership.
IPT and AIMCO have entered into an agreement and plan of merger, dated as
of October 1, 1998 (the "IPT Merger Agreement"), pursuant to which IPT is to be
merged into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger
Agreement provides that, upon consummation of the IPT Merger, IPT shareholders
will receive $13.25 per share in cash or $13.28 per share in shares of AIMCO's
Class A Common Stock, at AIMCO's option. The transactions contemplated by the
IPT Merger Agreement are subject to certain conditions. The IPT Merger requires
the approval of the holders of a majority of the outstanding IPT Shares. AIMCO
has indicated that it expects to vote all of the IPT Shares owned by it in favor
of the IPT Merger. Accordingly, IPT shareholder approval is assured.
One of the reasons AIMCO acquired Insignia was that AIMCO expected to make
offers to acquire limited partnership interests of some of the limited
partnerships formerly controlled or managed by Insignia (the "Insignia
Partnerships"). Such offers would provide liquidity for the limited partners of
the Insignia Partnerships. Such offers would also allow the AIMCO Operating
Partnership an opportunity to increase its
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ownership interest in certain Insignia Partnerships which would provide a
larger asset and capital base and increased diversification. As of October ,
1998, the AIMCO Operating Partnership has made offers to of the
Insignia Partnerships, including your partnership.
Previous Tender Offers
On July 30, 1998, Cooper River Properties, L.L.C., which is an affiliate of
Insignia and now our affiliate, commenced a tender offer for $33 per unit and
purchased shares on , 1998.
Prior to the Insignia Merger, a number of tender offers had been made to
acquire units of your partnership. On August 28, 1997, an affiliate of Insignia
and now our affiliate, commenced a tender offer pursuant to which it acquired
29,618 units (representing approximately 8.64% of the number outstanding) at a
cash purchase price of $140 per unit on October 16, 1997.
In December 1997, Madison River Properties, L.L.C., which was unaffiliated
with Insignia and is not affiliated with AIMCO, commenced a tender offer for $30
per unit and purchased 43,769 units in February 1998.
We are aware that other tender offers may have been made to acquire units
in your partnership in exchange for cash. We are unaware of the amounts offered,
terms, tendering parties or number of units involved in these tender offers.
Engagement of Fairness Opinion Provider
The AIMCO Operating Partnership contacted Stanger in August 1998 to discuss
the possibility of Stanger providing a fairness opinion for our offer. The AIMCO
Operating Partnership chose Stanger based on Stanger's expertise and strong
reputation in this area of work. The parties entered into a definitive agreement
dated October 20, 1998 for Stanger to provide such fairness opinion for your
partnership and other partnerships.
ALTERNATIVES CONSIDERED
The following is a brief discussion of the benefits and disadvantages of
alternatives to our offer that could have been pursued by the general partner of
your partnership.
Liquidation
Benefits of Liquidation. One alternative would be for your partnership to
sell its assets, distribute the net liquidation proceeds to its partners in
accordance with your partnership's agreement of limited partnership, and
thereafter dissolve. Partners would be at liberty to use the net liquidation
proceeds after taxes for investment, business, personal or other purposes, at
their option. If your partnership were to sell its assets and liquidate, you and
your partners would not need to rely upon capitalization of income or other
valuation methods to estimate the fair market value of your partnership's
assets. Instead, such assets would be valued through negotiations with
prospective purchasers (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's property would be a taxable event for you and your partners and
could result in significant amounts of taxable income to you and your partners.
In the opinion of the general partner of your partnership, the present time may
not be the most desirable time to sell the real estate assets of your
partnership in private transactions, and any liquidation sale would be
uncertain. Liquidation of the partnership's assets may trigger a substantial
prepayment penalty under the mortgage for the property. Your general partner
believes it currently is in the best interest of your partnership to continue
holding its real estate assets. Another option for liquidation would be to sell
your units in a private transaction. Any such sale likely would be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property and might involve significant expense and delay.
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<PAGE> 2073
Continuation of the Partnership Without the Offer
Benefits of Continuation. A second alternative would be for your
partnership to continue as a separate legal entity, with its own assets and
liabilities and continue to be governed by its existing agreement of limited
partnership, without our offer. A number of advantages could result from the
continued operation of your partnership. Given improving rental market
conditions, the level of distributions might increase over time. It is possible
that the private resale market for properties could improve over time, making a
sale of the partnership's property in a private transaction at some point in the
future a more attractive option than it is currently.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. Your partnership faces maturity or balloon payment dates on its mortgage
loans and must either obtain refinancing or sell its property. If your
partnership were to continue operating as presently structured, your partnership
could be forced to borrow on terms that could result in net losses from
operations.
In addition, continuation of your partnership as a separate entity without
our offer would deny you and your partners the benefits of our offer. For
example, you would have no opportunity for liquidity unless you were to sell
your units in a private transaction. Any such sale would likely be at a very
substantial discount from your pro rata share of the fair market value of your
partnership's property. Continuation without our offer would deny you and your
partners the benefits of diversification into a company which has a much larger
and more diverse portfolio of apartment properties.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the property owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
property owned by your partnership while providing you and other investors with
an opportunity to retain or liquidate your investment or to invest in the AIMCO
Operating Partnership.
There are four principal advantages of tendering your units for Preferred
OP Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Preferred OP Units and receive, at our option, shares of
AIMCO's Class I Preferred Stock, shares of AIMCO's Class A Common Stock
or cash. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the New York Stock
Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Preferred Quarterly Distributions. We will pay fixed quarterly
distributions of $ per unit on the Preferred OP Units before any
distributions are paid to holders of Common OP Units. However, one class
of outstanding Partnership Preferred Units has prior distribution rights
and the Tax-Deferral % Preferred Units rank equal to six other
outstanding classes of Partnership Preferred Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are five principal advantages of tendering your units for Common OP
Units:
- Enhanced Liquidity. After a one-year holding period, you may choose to
redeem your Common OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock (on a one-for-one basis, subject to adjustment in
certain circumstances) or an equivalent amount of cash. AIMCO's Class A
Common Stock is listed and traded on the New York Stock Exchange.
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
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<PAGE> 2074
- Quarterly Distributions. We pay quarterly distributions on the Common OP
Units. For the quarter ended June 30, 1998, we paid distributions of
$0.5625 on each of the Common OP Units (equivalent to $2.25 on an annual
basis). Historically, the quarterly distributions paid on the Common OP
Units have been equivalent to the dividends paid on AIMCO's Class A
Common Stock. We expect this to continue in the future.
- Growth Potential. Our organizational structure and access to capital
enables us to pursue acquisition and development opportunities that are
not available to your partnership. You would have the opportunity to
participate in the growth of our enterprise and would benefit from any
future increase in the AIMCO stock price and from any future increase in
distributions on the Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
The principal advantage if you tender your units for cash is immediate
liquidity. However, tendering your units for cash may cause you to recognize
taxable gain for Federal income tax purposes.
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 2075
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to % of the outstanding units of your
partnership for consideration per unit of (i) Preferred OP Units, (ii)
Common OP Units, or (iii) $ in cash. If you tender units pursuant
to our offer, you may choose to receive any of such forms of consideration for
your units or any combination of such forms of consideration.
The purchase price per unit will automatically be reduced by the aggregate
amount of distributions per unit, if any, made by your partnership to you on or
after , 1998 and prior to the date on which we acquire your units
pursuant to our offer.
Upon the terms and subject to the conditions of our offer set forth herein,
the AIMCO Operating Partnership will accept (and thereby purchase) units that
are validly tendered prior to the expiration of the offer and not withdrawn in
accordance with the procedures set forth in "-- Withdrawal Rights." Our offer
will expire at 5:00 p.m., Denver, Colorado time, on , 1998,
unless the AIMCO Operating Partnership in its sole discretion, extends the
offer. See "-- Extension of Tender Period; Termination; Amendment" for a
description of the AIMCO Operating Partnership's right to extend the period of
time during which the offer is open and to amend or terminate the offer.
If, prior to the expiration of the offer, the AIMCO Operating Partnership
increases the offer consideration, everyone whose units are accepted in the
offer will receive the increased consideration, regardless of whether their
units were tendered before or after the increase in the offer consideration.
The AIMCO Operating Partnership will, upon the terms and subject to the
conditions of the offer, accept for payment and pay for all units validly
tendered and not withdrawn prior to the expiration of our offer (subject to
proration as described below).
Our offer is conditioned on the satisfaction of certain conditions. Our
offer is not conditioned upon any minimum amount of units being tendered. See
"Conditions of the Offer," which sets forth in full the conditions of our offer.
The AIMCO Operating Partnership reserves the right (but is not obligated), in
its sole discretion, to waive any or all of those conditions. If, on or prior to
the expiration of the offer, any or all of the conditions have not been
satisfied or waived, the AIMCO Operating Partnership reserves the right to (i)
decline to purchase any of the units tendered, terminate the offer and return
all tendered units, (ii) waive all the unsatisfied conditions and purchase all
units validly tendered, (iii) extend the offer and, subject to the right of
unitholders to withdraw units until the expiration of the offer, retain the
units that have been tendered during the period or periods for which the offer
is extended, and (iv) amend the offer.
For administrative purposes, the transfer of units tendered pursuant to our
offer will be deemed to take effect as of , 1998 (subject to
proration as described below).
This offer is being mailed to the persons shown by your partnership's
records to have been limited partners or, in the case of units owned of record
by IRAs and qualified plans, beneficial owners of units, as of ,
1998.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS
Upon the terms and subject to the conditions of the offer, the AIMCO
Operating Partnership will purchase by accepting for payment and will pay for
all units (subject to proration as described below) which are validly tendered
and not withdrawn prior to the expiration of the offer as promptly as
practicable following the expiration of the offer. A beneficial owner of units
whose units are owned of record by an individual retirement account or other
qualified plan will not receive direct payment of the offer consideration.
Instead, payment will be made to the custodian of such account or plan. In all
cases, payment for units purchased pursuant to the offer will be made only after
timely receipt by the Information Agent of a properly completed and duly
executed Letter of Transmittal and any other documents required by the Letter of
Transmittal. The offer consideration shall be reduced by any interim
distributions made by your partnership between
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<PAGE> 2076
, 1998, and the expiration of the offer. See "-- Procedure for
Tendering Units." UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the offer, the AIMCO Operating Partnership will be deemed
to have accepted for payment pursuant to the offer, and thereby purchased,
validly tendered units if, as and when the AIMCO Operating Partnership gives
verbal or written notice to the Information Agent of its acceptance of those
units for payment pursuant to the offer. Payment for units accepted for payment
pursuant to the offer will be made through the Information Agent, which will act
as agent for tendering unitholders for the purpose of receiving cash payments
from the AIMCO Operating Partnership and transmitting cash payments to tendering
unitholders. OP Units will be issued directly by the AIMCO Operating Partnership
to those unitholders who elect to receive OP Units pursuant to the offer.
If any tendered units are not accepted for payment for any reason, the
Letter of Transmittal with respect to such units not purchased may be destroyed
by the AIMCO Operating Partnership or its agent. If for any reason, acceptance
for payment of, or payment for, any units tendered pursuant to the offer is
delayed or the AIMCO Operating Partnership is unable to accept for payment,
purchase or pay for units tendered pursuant to the offer, then, without
prejudice to the AIMCO Operating Partnership's rights under "-- Conditions of
the Offer," the Information Agent may, nevertheless, on behalf of the AIMCO
Operating Partnership retain tendered units, and those units may not be
withdrawn except to the extent that the tendering offerees are entitled to
withdrawal rights as described in "-- Withdrawal Rights;" subject, however, to
the AIMCO Operating Partnership's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay the
offer consideration in respect of units tendered or return those units promptly
after termination or withdrawal of the offer.
The AIMCO Operating Partnership reserves the right to transfer or assign,
in whole or in part, to one or more of its affiliates, the right to purchase
units tendered pursuant to the offer, but no such transfer or assignment will
relieve the AIMCO Operating Partnership of its obligations under the offer or
prejudice your right to receive payment for units validly tendered and accepted
for payment pursuant to the offer. Specifically, we may assign our rights to
purchase your units for which you elect to receive cash to IPT or Insignia
Properties, L.P. ("IPLP"). IPLP is a Delaware limited partnership that conducts
substantially all of the operations of IPT.
PROCEDURE FOR TENDERING UNITS
Valid Tender
To validly tender units pursuant to the offer, a properly completed and
duly executed Letter of Transmittal and any other documents required by such
Letter of Transmittal must be received by the Information Agent, at its address
set forth on the back cover of this Prospectus Supplement, on or prior to the
expiration of the offer. You may tender all or any portion of your units.
However, your partnership's agreement of limited partnership requires that you
tender a minimum of 12 units. You may tender fractional units only if you are
tendering all of your units. No alternative, conditional or contingent tenders
will be accepted.
Signature Requirements
IF THE LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER OF THE
UNITS AND PAYMENT IS TO BE MADE DIRECTLY TO THAT HOLDER, THEN NO SIGNATURE
GUARANTEE IS REQUIRED ON THE LETTER OF TRANSMITTAL. Similarly, if the units are
tendered for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Letter of
Transmittal. However, in all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
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<PAGE> 2077
In order to participate in the offer, you must validly tender and not
withdraw your units prior to the expiration of the offer.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER OF UNITS, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Appointment as Proxy
By executing the Letter of Transmittal, you will irrevocably appoint the
AIMCO Operating Partnership and its designees as your proxies (in the manner set
forth in the Letter of Transmittal), each with full power of substitution, to
the fullest extent of your rights with respect to your units tendered and
accepted for payment by the AIMCO Operating Partnership. Each such proxy shall
be considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, the AIMCO Operating
Partnership accepts the tendered units for payment. Upon such acceptance for
payment, all prior proxies given by you with respect to such units will, without
further action, be revoked, and no subsequent proxies may be given (and if given
will not be effective). The AIMCO Operating Partnership and the designees of the
AIMCO Operating Partnership will, as to those units, be empowered to exercise
all of your voting and other rights as they, in their sole discretion, may deem
proper at any meeting of unitholders, by written consent or otherwise. The AIMCO
Operating Partnership reserves the right to require that, in order for units to
be deemed validly tendered, immediately upon the AIMCO Operating Partnership's
acceptance for payment for the units, the AIMCO Operating Partnership must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of unitholders then scheduled or acting by written consent
without a meeting. By executing the Letter of Transmittal, you agree to execute
all such documents and take such other actions as shall be reasonably required
to enable the units tendered to be voted in accordance with the directions of
the AIMCO Operating Partnership. The proxy and power of attorney granted to the
AIMCO Operating Partnership upon your execution of the Letter of Transmittal
will remain effective and be irrevocable for a period of ten years following the
termination of the offer.
Power of Attorney
By executing a Letter of Transmittal, you also irrevocably constitute and
appoint the AIMCO Operating Partnership and its managers and designees as your
attorneys-in-fact, each with full power of substitution, to the full extent of
your rights with respect to the units tendered by you and accepted for payment
by the AIMCO Operating Partnership. Such appointment will be effective when, and
only to the extent that, the AIMCO Operating Partnership accepts the tendered
units for payment. You agree not to exercise any rights pertaining to the
tendered units without the prior consent of the AIMCO Operating Partnership.
Upon such acceptance for payment, all prior powers of attorney granted by you
with respect to such units will, without further action, be revoked, and no
subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact, the AIMCO
Operating Partnership and its managers and designees each will have the power,
among other things, (i) to transfer ownership of such units on the partnership
books maintained by the general partner of your partnership (and execute and
deliver any accompanying evidences of transfer and authenticity any of them may
deem necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent of the offer consideration, to become a substituted limited
partner, to receive any and all distributions made by your partnership on or
after the date on which the AIMCO Operating Partnership acquires such units, and
to receive all benefits and otherwise exercise all rights of beneficial
ownership of such units in accordance with the terms of our offer, (iii) to
execute and deliver to the general partner of your partnership a change of
address form instructing the general partner to send any and all future
distributions to which the AIMCO Operating Partnership is entitled pursuant to
the terms of the offer in respect of tendered units to the address specified in
such form, and (iv) to endorse any check payable to you or upon your order
representing a distribution to which the AIMCO Operating Partnership is entitled
pursuant to the terms of our offer, in each case, in your name and on your
behalf.
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<PAGE> 2078
Assignment of Interest in Future Distributions and All Other Rights, Etc.
If you tender units, you will agree to irrevocably sell, assign, transfer,
convey and deliver to, or upon the order of, the AIMCO Operating Partnership,
all of your right, title and interest in and to such units tendered that are
accepted for payment pursuant to the offer, including, without limitation, (i)
all of your interest in the capital of your partnership, and interest in all
profits, losses and distributions of any kind to which you shall at any time be
entitled in respect of the units; (ii) all other payments, if any, due or to
become due to you in respect of the units, under or arising out of your
partnership's agreement of limited partnership, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise;
(iii) all of your claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of your
partnership's agreement of limited partnership or your ownership of the units,
including, without limitation, all voting rights, rights of first offer, first
refusal or similar rights, and rights to be substituted as a limited partner of
your partnership; and (iv) all of your present and future claims, if any,
against your partnership or your partners under or arising out of your
partnership's agreement of limited partnership for monies loaned or advanced,
for services rendered, for the management of your partnership or otherwise.
Election of Consideration
You may elect to receive Preferred OP Units, Common OP Units or cash
pursuant to our offer, by so indicating in the appropriate space on the Letter
of Transmittal. In the event that you tender units but do not indicate on the
Letter of Transmittal which type of consideration you want, the AIMCO Operating
Partnership will issue Preferred OP Units to you.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of units pursuant to the offer
will be determined by the AIMCO Operating Partnership, in its sole discretion,
which determination shall be final and binding on all parties. The AIMCO
Operating Partnership reserves the absolute right to reject any or all tenders
of any particular unit determined by it not to be in proper form or if the
acceptance of or payment for that unit may, in the opinion of the AIMCO
Operating Partnership's counsel, be unlawful. The AIMCO Operating Partnership
also reserves the absolute right to waive or amend any of the conditions of the
offer that it is legally permitted to waive as to the tender of any particular
unit and to waive any defect or irregularity in any tender with respect to any
particular unit. The AIMCO Operating Partnership's interpretation of the terms
and conditions of the offer (including the Letters of Transmittal) will be final
and binding on all parties. No tender of units will be deemed to have been
validly made unless and until all defects and irregularities have been cured or
waived. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any units or will incur any liability for
failure to give any such notification.
Backup Federal Income Tax Withholding
To prevent the possible application of back-up Federal income tax
withholding of 31% with respect to payment of the offer consideration, you must
provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal and
"Certain Federal Income Tax Matters."
FIRPTA Withholding
To prevent the withholding of Federal income tax in an amount equal to 10%
of the amount realized pursuant to the offer, you must certify under penalty of
perjury that you are not a foreign person. See the instructions to the Letter of
Transmittal and "Certain Federal Income Tax Matters."
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<PAGE> 2079
Binding Agreement
If you tender units pursuant to any of the procedures described above, the
acceptance for payment of such units will constitute a binding agreement between
you and the AIMCO Operating Partnership on the terms set forth in this
Prospectus Supplement.
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to the expiration of our offer, as provided in this Prospectus Supplement, and
unless units have been accepted for payment as described in "-- Acceptance For
Payment and Payment For Units," tenders of units pursuant to this offer may be
made on or after , 199 .
For withdrawal to be effective, a written notice of withdrawal must be
timely received by the Information Agent at its address set forth on the back
cover of this Prospectus Supplement. Any such notice of withdrawal must specify
the name of the person who tendered, the number of units to be withdrawn and the
name of the registered holder of such units, if different from the person who
tendered. In addition, the notice of withdrawal must be signed by the person(s)
who signed the Letter of Transmittal in the same manner as the Letter of
Transmittal was signed.
If purchase of, or payment for, units is delayed for any reason or if the
AIMCO Operating Partnership is unable to purchase or pay for units for any
reason, then, without prejudice to the AIMCO Operating Partnership's rights
under the offer, tendered units may be retained by the Information Agent and may
not be withdrawn, except to the extent that participants are entitled to
withdrawal rights as set forth herein; subject, however, to the AIMCO Operating
Partnership's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay the offer consideration in respect of units tendered or return those units
promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the AIMCO Operating Partnership, in
its sole discretion, which determination shall be final and binding on all
parties. Neither the AIMCO Operating Partnership, the Information Agent nor any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The AIMCO Operating Partnership expressly reserves the right, in its sole
discretion, at any time and from time to time, (i) to extend the period of time
during which the offer is open and thereby delay acceptance for payment of, and
for, any units, (ii) to terminate the offer and not accept for payment any units
not theretofore accepted for payment or paid for if any of the conditions to the
offer are not satisfied or if any event occurs that might reasonably be expected
to result in a failure to satisfy such conditions, (iii) upon the occurrence of
any of the conditions specified in "-- Conditions of the Offer," to delay the
acceptance for payment of, or for, any units not already accepted for payment or
paid for and (iv) to amend the offer in any respect (including, without
limitation, increasing or decreasing the number of Preferred OP Units or Common
OP Units, or the amount of cash offered, eliminating any of the alternative
types of consideration being offered, or increasing or decreasing the percentage
of outstanding units being sought). Notice of any such extension, termination or
amendment will promptly be disseminated in a manner reasonably designed to
inform unitholders of such change. In the case of an extension of the offer, the
extension will be followed by a press release or public announcement which will
be issued no later than 7:00 a.m., Denver, Colorado time, on the next business
day after the scheduled expiration date of the offer, in accordance with Rule
14e-1(d) under the Exchange Act.
If the AIMCO Operating Partnership extends the offer, or if the AIMCO
Operating Partnership (whether before or after its acceptance for payment of
units) is delayed in its payment for units or is unable to
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<PAGE> 2080
pay for units pursuant to the offer for any reason, then, without prejudice
to the AIMCO Operating Partnership's rights under the offer, the Information
Agent may retain tendered units and those units may not be withdrawn except to
the extent participants are entitled to withdrawal rights as described in
"-- Withdrawal Rights;" subject, however, to the AIMCO Operating Partnership's
obligation, pursuant to Rule 14e-1(c), under the Exchange Act, to pay the offer
consideration in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If the AIMCO Operating Partnership makes a material change in the terms of
the offer, or if it waives a material condition to the offer, the AIMCO
Operating Partnership will extend the offer and disseminate additional tender
offer materials to the extent required by Rule 14e-1 under the Exchange Act. The
minimum period during which the offer must remain open following any material
change in the terms of the offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee, will
depend upon the facts and circumstances, including the materiality of the
change. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought or a change in any dealer's
soliciting fee, a minimum of ten business days from the date of such change is
generally required to allow for adequate dissemination to participants.
Accordingly, if prior to the expiration of the offer, the AIMCO Operating
Partnership increases (other than increases of not more than two percent of the
outstanding units) or decreases the number of units being sought, or increases
or decreases the consideration offered pursuant to the offer, and if the offer
is scheduled to expire at any time earlier than the tenth business day from the
date that notice of such increase or decrease is first published, sent or given
to unitholders, the offer will be extended at least until the expiration of such
ten business days. As used herein, "business day" means any day other than a
Saturday, Sunday or a Federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.
PRORATION
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer does not exceed % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will purchase all such units so tendered and not withdrawn.
If the number of units properly tendered and not withdrawn prior to the
expiration of the offer exceeds % of the outstanding units, the AIMCO
Operating Partnership, upon the terms and subject to the conditions of the
offer, will accept for purchase all units properly tendered and not withdrawn
prior to the expiration of the offer on a pro rata basis.
Following the expiration of the offer, the AIMCO Operating Partnership may
renew the offer one or more times on the same terms as described in this
Prospectus Supplement. If the number of units properly tendered and not
withdrawn prior to the expiration of any such renewal (together with units
previously purchased in the offer) is or less, the AIMCO
Operating Partnership will purchase such units so tendered and not withdrawn. If
the number of units in your partnership properly tendered and not withdrawn
prior to the expiration of any such renewal (together with any units previously
purchased in this offer) is greater than , the AIMCO Operating
Partnership will purchase units in the order of priority described in the
preceding paragraph.
In the event that proration of tendered units is required, the AIMCO
Operating Partnership will determine the final proration factor as promptly as
practicable after the expiration of the offer or any renewal of the offer.
FRACTIONAL OP UNITS
We will issue fractional Common OP Units or Preferred OP Units, if
necessary.
FUTURE PLANS OF THE AIMCO OPERATING PARTNERSHIP
As described above under "Background and Reasons for the Offer," the AIMCO
Operating Partnership owns a majority of the general partner of your partnership
and thereby controls the management of your
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partnership. In addition, AIMCO owns a majority of the company that manages
your partnership's property. The AIMCO Operating Partnership currently intends
that, upon consummation of the offer, your partnership will continue its
business and operations substantially as they are currently being conducted. The
offer is not expected to have any effect on your partnership's financial
condition or results of operations.
After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units. Any
acquisition may be made through private purchases, market purchases or
transactions effected on a so-called partnership trading board, through one or
more future tender or exchange offers, by merger, consolidation or by any other
means deemed advisable. Any acquisition may be at a price higher or lower than
the price to be paid for the units purchased pursuant to this offer, and may be
for cash, limited partnership interests in the AIMCO Operating Partnership or
other consideration. The AIMCO Operating Partnership also may consider selling
some or all of the units it acquires pursuant to the offer to persons not yet
determined, which may include affiliates of the AIMCO Operating Partnership. The
AIMCO Operating Partnership may also buy your partnership's property, although
it has no present intention to do so. There can be no assurance, however, that
the AIMCO Operating Partnership will initiate or complete, or will cause your
partnership to initiate or complete, any subsequent transaction during any
specific time period following the expiration of the offer or at all.
We currently intend that, upon consummation of the offer, your partnership
will continue its business and operations substantially as they are currently
being conducted. We do not have any present plans or proposals which relate to
or would result in any material changes in your partnership's structure or
business such as a merger, reorganization or liquidation. We have no present
intention to cause your partnership to sell any of its properties or to prepay
current mortgages within any specified time period.
VOTING BY THE AIMCO OPERATING PARTNERSHIP
If the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, the AIMCO Operating Partnership may be in a position to
influence voting decisions with respect to your partnership. Under your
partnership's agreement of limited partnership, holders of outstanding units are
entitled to take action with respect to a variety of matters, including
dissolution and most types of amendments to your partnership's agreement of
limited partnership. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
DISSENTERS' RIGHTS
Neither your partnership's agreement of limited partnership nor applicable
law provides any right for you to have your units appraised or redeemed in
connection with or as a result of the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the offer, the AIMCO Operating
Partnership shall not be required to accept for payment and pay for any units
tendered pursuant to the offer, may postpone the purchase of, and payment for,
units tendered, and may terminate or amend the offer if at any time from or
after , 1998 and at or before the time of acceptance for payment of
any such units (whether or not any units have theretofore been accepted for
payment and paid for) pursuant to the offer, any of the following shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, indebtedness, capitalization, condition
(financial or otherwise), operations, licenses or franchises, management
contract, or results of operations or prospects of your partnership or
local markets in which your partnership owns or operates its property,
including any fire, flood, natural disaster, casualty loss, or act of God
that, in the sole judgment of the AIMCO Operating Partnership, is or may be
materially adverse to your partnership or the value of your units to the
AIMCO Operating Partnership, or the AIMCO Operating Partnership shall have
become aware of any facts relating to your partnership, its indebtedness or
its operations
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which, in the sole judgment of the AIMCO Operating Partnership, has or may
have material significance with respect to the value of your partnership or
the value of your units to the AIMCO Operating Partnership; or
(b) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or the over-the-counter market in the United States, (ii) a decline in the
closing share price of AIMCO's Class A Common Stock of more than 7.5% per
share, from , 1998 (iii) any extraordinary or material
adverse change in the financial, real estate or money markets or major
equity security indices in the United States such that there shall have
occurred at least a 7.5% increase in LIBOR or at least a 7.5% decrease in
the S&P 500 Index, the Morgan Stanley REIT Index, or the price of the
10-year Treasury Bond or the price of the 30-year Treasury Bond, in each
case from , 1998 (iv) any material adverse change in the
commercial mortgage financing markets, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United
States, (vii) any limitation (whether or not mandatory) by any governmental
authority on, or any other event which, in the sole judgment of the AIMCO
Operating Partnership, might affect the extension of credit by banks or
other lending institutions, or (viii) in the case of any of the foregoing
existing at the time of the commencement of the offer, in the sole judgment
of the AIMCO Operating Partnership, a material acceleration or worsening
thereof; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by any Federal, state, local or
foreign government, governmental authority or governmental agency, or by
any other person, before any governmental authority, court or regulatory or
administrative agency, authority or tribunal, which (i) challenges or seeks
to challenge the acquisition by the AIMCO Operating Partnership of the
units, restrains, prohibits or delays the making or consummation of the
offer, prohibits the performance of any of the contracts or other
arrangements entered into by the AIMCO Operating Partnership (or any
affiliates of the AIMCO Operating Partnership) seeks to obtain any material
amount of damages as a result of the transactions contemplated by the
offer, (ii) seeks to make the purchase of, or payment for, some or all of
the units pursuant to the offer illegal or results in a delay in the
ability of the AIMCO Operating Partnership to accept for payment or pay for
some or all of the units, (iii) seeks to prohibit or limit the ownership or
operation by AIMCO or any of its affiliates of the entity serving as the
general partner of your partnership or to remove such entity as the general
partner of your partnership, or seeks to impose any material limitation on
the ability of the AIMCO Operating Partnership or any of its affiliates to
conduct your partnership's business or own such assets, (iv) seeks to
impose material limitations on the ability of the AIMCO Operating
Partnership or any of its affiliates to acquire or hold or to exercise full
rights of ownership of the units including, but not limited to, the right
to vote the units purchased by it on all matters properly presented to
unitholders or (v) might result, in the sole judgment of the AIMCO
Operating Partnership, in a diminution in the value of your partnership or
a limitation of the benefits expected to be derived by the AIMCO Operating
Partnership as a result of the transactions contemplated by the offer or
the value of units to the AIMCO Operating Partnership; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall be sought, proposed, enacted, promulgated,
entered, enforced or deemed applicable to the offer, the AIMCO Operating
Partnership, its general partner or any of its affiliates or any other
action shall have been taken, proposed or threatened, by any government,
governmental authority or court, that, in the sole judgment of the AIMCO
Operating Partnership, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (c) above;
or
(e) your partnership shall have (i) changed, or authorized a change
of, its units or your partnership's capitalization, (ii) issued,
distributed, sold or pledged, or authorized, proposed or announced the
issuance, distribution, sale or pledge of (A) any equity interests
(including, without limitation, units), or securities convertible into any
such equity interests or any rights, warrants or options to acquire any
such equity interests or convertible securities, or (B) any other
securities in respect of, in
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lieu of, or in substitution for units outstanding on the date hereof, (iii)
purchased or otherwise acquired, or proposed or offered to purchase or
otherwise acquire, any outstanding units or other securities, (iv) declared
or paid any dividend or distribution on any units or issued, authorized,
recommended or proposed the issuance of any other distribution in respect
of the units, whether payable in cash, securities or other property, (v)
authorized, recommended, proposed or announced an agreement, or intention
to enter into an agreement, with respect to any merger, consolidation,
liquidation or business combination, any acquisition or disposition of a
material amount of assets or securities, or any release or relinquishment
of any material contract rights, or any comparable event, not in the
ordinary course of business, (vi) taken any action to implement such a
transaction previously authorized, recommended, proposed or publicly
announced, (vii) issued, or announced its intention to issue, any debt
securities, or securities convertible into, or rights, warrants or options
to acquire, any debt securities, or incurred, or announced its intention to
incur, any debt other than in the ordinary course of business and
consistent with past practice, (viii) authorized, recommended or proposed,
or entered into, any transaction which, in the sole judgment of the AIMCO
Operating Partnership, has or could have an adverse affect on the value of
your partnership or the units, (ix) proposed, adopted or authorized any
amendment of its organizational documents, (x) agreed in writing or
otherwise to take any of the foregoing actions, or (xi) been notified that
any debt of your partnership or any of its subsidiaries secured by any of
its or their assets is in default or has been accelerated; or
(f) a tender or exchange offer for any units shall have been commenced
or publicly proposed to be made by another person or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934), or it shall have
been publicly disclosed or the AIMCO Operating Partnership shall have
otherwise learned that (i) any person or group shall have acquired or
proposed or be attempting to acquire beneficial ownership of more than four
percent of the units, or shall have been granted any option, warrant or
right, conditional or otherwise, to acquire beneficial ownership of more
than four percent of the units, or (ii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a merger, consolidation, purchase or lease of
assets, debt refinancing or other business combination with or involving
your partnership; or
(g) with respect to the cash portion of the offer consideration only,
the AIMCO Operating Partnership shall not have adequate cash or financing
commitments available to pay the cash portion of the offer consideration.
The foregoing conditions are for the sole benefit of the AIMCO Operating
Partnership and may be asserted by the AIMCO Operating Partnership regardless of
the circumstances giving rise to such conditions or may be waived by the AIMCO
Operating Partnership in whole or in part at any time and from time to time in
its sole discretion. The failure by the AIMCO Operating Partnership at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances and each right shall be deemed a continuing right which may be
asserted at any time and from time to time.
EFFECTS OF THE OFFER
Future Control by AIMCO
Because the general partner of your partnership is a subsidiary of AIMCO,
AIMCO has control over the management of your partnership. If the AIMCO
Operating Partnership acquires units in the offer, AIMCO will increase its
ability to influence voting decisions with respect to your partnership.
Furthermore, in the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the general
partner of your partnership (which general partner is controlled by AIMCO)
without AIMCO's consent may become more difficult or impossible. AIMCO also owns
a majority of the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a
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substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Limitations on Resales
Your partnership's agreement of limited partnership prohibits transfers of
units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of your partnership
for Federal or any applicable state income tax purposes. This provision may
limit sales of units in the secondary market and in private transactions for the
twelve-month period following completion of this offer. The general partner of
your partnership has advised the AIMCO Operating Partnership that it will not
process any requests for recognition of substitution of limited partners upon a
transfer of units during such twelve-month period which the general partner
believes may cause a tax termination in contravention of the agreement of
limited partnership. The AIMCO Operating Partnership took this restriction into
account in determining the maximum number of units for which this offer is made.
Based on the general partner's records, approximately 3,060.8 units in your
partnership have been transferred during the twelve months ending December 31,
1997 (representing approximately 1.70% of the outstanding units). As a result,
the AIMCO Operating Partnership does not believe that this restriction will
preclude it from acquiring the maximum number of units for which this offer is
made.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act
If a substantial number of units are purchased pursuant to the offer, the
result will be a reduction in the number of limited partners in your
partnership. In the case of certain kinds of equity securities, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. In this
case, however, there is no established public trading market for the units and,
therefore, the AIMCO Operating Partnership does not believe a reduction in the
number of limited partners will materially further restrict your ability to find
purchasers for your units through secondary market transactions.
The units are registered under Section 12(g) of the Securities Exchange Act
of 1934, which means, among other things, that your partnership is required to
file periodic reports with the SEC and to comply with the SEC's proxy rules. The
AIMCO Operating Partnership does not expect or intend that consummation of the
offer will cause the units to cease to be registered under Section 12(g) of the
Securities Exchange Act of 1934. If the units were to be held by fewer than 300
persons, your partnership could apply to de-register the units under the
Securities Exchange Act of 1934. Because the units are widely held, however, the
AIMCO Operating Partnership believes that, even if it purchases the maximum
number of units in the offer, the units will be held of record by more than 300
persons.
Distributions to the AIMCO Operating Partnership
As a result of the offer, the AIMCO Operating Partnership, in its capacity
as a limited partner of your partnership, will participate in any subsequent
distributions to limited partners to the extent of its interest in your
partnership, including the units purchased pursuant to this offer.
Partnership Business
This offer will not affect the operation of your partnership's property.
The AIMCO Operating Partnership will continue to control the general partner of
your partnership and the property manager will remain the same.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by the general partner of your
partnership, aware of any licenses or regulatory permits that would be material
to the business of your partnership, taken as a whole, and that might be
adversely affected by the AIMCO Operating Partnership's acquisition of units as
contemplated herein, or any filings,
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approvals or other actions by or with any domestic or foreign governmental
authority or administrative or regulatory agency that would be required prior to
the acquisition of units by the AIMCO Operating Partnership pursuant to the
offer as contemplated herein, other than the filing with the SEC of a Tender
Offer Statement on Schedule 14D-1 and any amendments required thereto. While
there is no present intent to delay the purchase of units tendered pursuant to
the offer pending receipt of any such additional approval or the taking of any
such action, there can be no assurance that any such additional approval or
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to your partnership's business, or that
certain parts of your partnership's business might not have to be disposed of or
other substantial conditions complied with in order to obtain such approval or
action, any of which could cause the AIMCO Operating Partnership to elect to
terminate the offer without purchasing units hereunder. The AIMCO Operating
Partnership's obligation to purchase and pay for units is subject to certain
conditions, including conditions related to the legal matters discussed in this
section.
Antitrust. The AIMCO Operating Partnership does not believe that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is applicable
to the acquisition of units contemplated by this offer.
Margin Requirements. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to this offer.
State Laws. The AIMCO Operating Partnership is not aware of any
jurisdiction in which the making of the offer is not in compliance with
applicable law. If the AIMCO Operating Partnership becomes aware of any
jurisdiction in which the making of the offer would not be in compliance with
applicable law, the AIMCO Operating Partnership will make a good faith effort to
comply with any such law. If, after such good faith effort, the AIMCO Operating
Partnership cannot comply with any such law, the offer will not be made to (nor
will tenders be accepted from or on behalf of) limited partners residing in such
jurisdiction. In those jurisdictions whose securities or blue sky laws require
the offer to be made by a licensed broker or dealer, the offer shall be made on
behalf of the AIMCO Operating Partnership, if at all, only by one or more
registered brokers or dealers licensed under the laws of that jurisdiction.
Certain Litigation
On March 24, 1998, certain persons claiming to own limited partner
interests in certain of the limited partnerships for which subsidiaries of IPT
act as general partner (including your partnership) filed a purported class and
derivative action in California Superior Court in the County of San Mateo
against AIMCO, Insignia, the general partners of the partnerships, certain
persons and entities who purportedly formerly controlled the general partners,
and additional entities affiliated with and individuals who are officers,
directors and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached fiduciary
duties owed to the plaintiffs, or aided and abetted in those purported breaches,
by selling or agreeing to sell their "fiduciary positions" as stockholders,
officers and directors of the general partners for a profit and retaining said
profit rather than distributing it to the plaintiffs; (ii) the defendants
breached fiduciary duties, or aided and abetted in those purported breaches, by
mismanaging the partnerships and misappropriating assets of the partnerships by
(a) manipulating the operations of the partnerships to depress the trading price
of limited partnership units of the Partnerships; (b) coercing and fraudulently
inducing unitholders to sell units to certain of the defendants at depressed
prices; and (c) using the voting control obtained by purchasing units at
depressed prices to entrench certain of the defendants' positions of control
over the partnerships; and (iii) the defendants breached their fiduciary duties
to the plaintiffs by (a) selling assets of the partnerships such as mailing
lists of unitholders and (b) causing the general partners to enter into
exclusive arrangements with their affiliates to sell goods and services to the
general partners, the unitholders and tenants of properties owned by the
partnerships. The complaint also alleges that the foregoing allegations
constitute violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The complaint
seeks unspecified compensatory and punitive damages, an injunction blocking the
sale of control of the general partners and a court order directing the
defendants to discharge their fiduciary duties to the plaintiffs. On June 25,
1998, the defendants filed motions seeking dismissal of the action. In lieu of
responding to the motion, plaintiffs have
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filed an amended complaint. On October 14, 1998, the AIMCO and Insignia
defendants filed demurrers to the amended complaint. The demurrers are scheduled
to be heard on January 8, 1999.
On July 30, 1998, certain entities claiming to own limited partnership
interests in a number of the limited partnerships for which subsidiaries of IPT
act as general partner filed a complaint in the Superior Court of the State of
California, County of Los Angeles against Insignia, the partnerships, the
general partners and additional entities affiliated with several of the
defendants. Plaintiffs allege that they have requested from, but have been
denied by each of the partnerships, lists of their respective limited partners
for the purpose of making tender offers to purchase up to 4.9% of the units of
limited partnership interest in each of the partnerships. The complaint also
alleges that certain of the defendants made tender offers to purchase units of
limited partnership interest in many of the partnerships, with the alleged
result that plaintiffs have been deprived of the benefits they would have
realized from ownership of the additional units. The plaintiffs assert eleven
causes of action, including breach of contract, unfair business practices, and
violations of the partnership statutes of the states in which the partnerships
are organized. Plaintiffs seeks compensatory, punitive and treble damages.
Plaintiffs estimate compensatory damages to exceed $15 million. An answer to the
complaint has been filed by of the defendants on September 15, 1998.
FEES AND EXPENSES
The AIMCO Operating Partnership will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of units pursuant to the
offer. The AIMCO Operating Partnership has retained River Oaks Partnership
Services, Inc. to act as Information Agent in connection with the offer. The
Information Agent may contact holders of units by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominees to forward materials relating to the offer to beneficial owners of the
units. The AIMCO Operating Partnership will pay the Information Agent reasonable
and customary compensation for its services in connection with the offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the Federal securities laws. The AIMCO Operating
Partnership will also pay all costs and expenses of printing and mailing this
Prospectus Supplement and the Letter of Transmittal and its legal fees and
expenses. The AIMCO Operating Partnership will also pay the fees of Stanger for
providing the fairness opinion for the offer. The AIMCO Operating Partnership
estimates that its total costs and expenses in making the offer (excluding the
purchase price of the units) will be approximately $ .
ACCOUNTING TREATMENT
Upon consummation of the offer, the AIMCO Operating Partnership will
account for its investment in the units acquired in the offer under the purchase
method of accounting. There will be no effect on the accounting treatment of
your partnership as a result of the offer.
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CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain Federal income tax
consequences of the Offer that may be relevant to (i) persons who tender some or
all of their units in exchange for OP Units pursuant to the offer, (ii) persons
who tender some or all of their units for cash pursuant to the offer and (iii)
persons who do not tender any of their units pursuant to the offer. This
discussion is based upon the Internal Revenue Code of 1986 as amended ("the
Code"), Treasury Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this offer and all of which are subject to
change, possibly retroactively. Such summary is based on the assumptions that
the AIMCO Operating Partnership and your partnership will be operated in
accordance with their respective organizational documents and partnership
agreements. This summary is for general information only and does not purport to
discuss all aspects of Federal income taxation which may be important to a
particular person in light of its investment or tax circumstances, or to certain
types of investors subject to special tax rules (including financial
institutions, broker-dealers, insurance companies, and, except to the extent
discussed below, tax-exempt organizations and foreign investors, as determined
for United States Federal income tax purposes). This summary assumes that your
units and any OP Units that you receive in the offer constitute capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this Prospectus
Supplement.
THE FEDERAL INCOME TAX TREATMENT OF AN OFFEREE PARTICIPATING IN THE OFFER
DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF
COMPLEX PROVISIONS OF FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, YOU SHOULD CONSULT YOUR TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO YOU OF
SELLING OR EXCHANGING UNITS PURSUANT TO THE OFFER OR OF A DECISION NOT TO SELL
OR EXCHANGE IN LIGHT OR YOUR SPECIFIC TAX SITUATION.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR OP UNITS
Except as described below, you will not recognize gain or loss for Federal
income tax purposes upon an exchange of units solely for OP Units. You may
recognize gain upon such exchange, where, immediately prior to such exchange,
the amount of liabilities of your partnership allocable to the units transferred
by you exceeds the amount of the AIMCO Operating Partnership liabilities
allocated to the OP Units issued to you, as determined immediately after such
exchange. In such event, any such excess would be treated as a deemed
distribution to you of cash from the AIMCO Operating Partnership. Such deemed
cash distribution would be treated as a nontaxable return of capital to the
extent of your adjusted tax basis in the OP Units received, and thereafter as a
taxable gain.
The AIMCO Operating Partnership anticipates that, under most circumstances,
you will be allocated an amount of the AIMCO Operating Partnership liabilities,
as determined immediately after an exchange of units pursuant to the offer, at
least equal to the amount of liabilities of your partnership that were allocable
to such units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most people would not recognize gain or loss as a
result of an exchange of units solely for OP Units pursuant to the offer.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Certain Federal Income Tax
Considerations -- the AIMCO Operating Partnership Tax Considerations -- Tax
Consequences Upon Contribution of Property to the AIMCO Operating Partnership"
in the accompanying Prospectus.
TAX CONSEQUENCES OF EXCHANGING UNITS FOR CASH AND OP UNITS
Generally, if you exchange your units for cash and OP Units, it will be
treated, for Federal income tax purposes, as a partial taxable sale of such
units for cash and as a partial tax-free contribution of such units to the AIMCO
Operating Partnership. The portion of the units that will be treated as sold to
the AIMCO Operating Partnership will be equal to a fraction, the numerator of
which will be the sum of the cash received by you pursuant to the offer plus the
amount of your partnership liabilities deemed transferred to you pursuant to the
offer, and the denominator of which is the fair market value of the aggregate
consideration
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pursuant to the offer, and the denominator of which is the fair market
value of the aggregate consideration received by you pursuant to the offer
(i.e., the sum of the numerator of such fraction plus the fair market value of
the OP Units received by you pursuant to the offer). The transfer by you of the
remaining portion of such units will generally be treated as a tax-free
contribution. At the time of transfer, the adjusted tax basis of the transferred
units is allocated between the portion of the units deemed sold and the
remaining portion of the units deemed contributed on the basis of each such
portion's respective fair market value.
For purposes of the partial sale rules, the amount of your partnership's
liabilities deemed transferred in the exchange will be equal to the lesser of
(i) the excess of your partnership's liabilities allocable to you in respect of
the transferred units immediately prior to the exchange, over the AIMCO
Operating Partnership liabilities allocated to you as determined immediately
after the exchange or (ii) the product of (A) your partnership's liabilities
allocable to you in respect of such transferred units immediately prior to the
exchange and (B) a fraction, (x) the numerator of which is the cash received and
(y) the denominator of which is the excess of the fair market value of the
aggregate consideration received in the exchange over the amount of your
partnership liabilities allocable to you in respect of the transferred units
immediately prior to the exchange.
To the extent that your transfer of units to the AIMCO Operating
Partnership is treated as a taxable sale, you will recognize gain or loss in an
amount equal to the difference between (i) the cash received plus the amount of
your partnership's liabilities deemed transferred in the exchange and (ii) the
adjusted tax basis allocable to the portion of such units deemed sold. Thus,
your tax liability resulting from such sale of units could exceed the amount of
cash received upon such sale. To the extent that your transfer of units in
exchange for OP Units is treated as a tax-free contribution to the AIMCO
Operating Partnership, you will generally not recognize any gain or loss for
Federal income tax purposes. You may recognize gain upon such exchange if the
amount of your partnership's liabilities allocable to you, as determined
immediately prior to the exchange, in respect of the portion of units that are
treated as being transferred in a tax-free contribution exceeds the amount of
the AIMCO Operating Partnership liabilities allocated to you, as determined
immediately after the exchange. In this event, such excess would be treated as a
deemed distribution of cash from the AIMCO Operating Partnership to you. Such
deemed cash distribution would be treated as a nontaxable return of capital to
the extent of your adjusted tax basis in the OP Units received, and thereafter
as a taxable gain. You will have a holding period in the OP Units received
pursuant to the portion of the exchange that is treated as a tax free
contribution that includes the holding period of your units transferred in
exchange therefor.
TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
In general, you will recognize gain or loss on a sale of a unit pursuant to
the offer equal to the difference between (i) your "amount realized" on the sale
and (ii) your adjusted tax basis in the units sold. The "amount realized" with
respect to a unit will be equal to the sum of the amount of cash received by you
for the unit sold pursuant to the offer (that is, the offer consideration) plus
the amount of the liabilities of your partnership allocable to such unit (as
determined under Section 752 of the Code). Thus, your tax liability resulting
from such sale of units could exceed the amount of cash received upon such sale.
ADJUSTED TAX BASIS
In general, investors in your partnership had an initial tax basis in their
units equal to the cash investment in the partnership increased by their share
of partnership liabilities at the time such units were acquired. Your initial
tax basis generally has been increased by (i) your share of your partnership's
income and gains and (ii) any increases in your share of liabilities of your
partnership, and has been decreased (but not below zero) by (i) your share of
cash distributions from your partnership, (ii) any decreases in your share of
liabilities of your partnership, (iii) your share of losses of your partnership,
and (iv) your share of nondeductible expenditures of your partnership that are
not chargeable to capital. For purposes of determining your adjusted tax basis
in units immediately prior to a disposition of such units, your adjusted tax
basis in such units will include your allocable share of your partnership's
income, gain or loss for the taxable year of disposition. If your adjusted tax
basis is less than your share of your partnership's liabilities (e.g., as a
result of the effect of net loss allocations and/or distributions exceeding the
cost of your unit), your gain recognized
S-46
<PAGE> 2089
pursuant to the offer will exceed the cash proceeds realized upon the sale
of such unit. The initial adjusted tax basis of the OP Units received by you in
exchange for your units pursuant to the offer will be equal to (i) the sum of
your adjusted tax basis in such transferred units plus any gain recognized in
the exchange and reduced by (ii) cash received or deemed received in the
exchange.
CHARACTER OF GAIN OR LOSS RECOGNIZED PURSUANT TO THE OFFER
Except as described below, the gain or loss that you recognize on a sale or
exchange of a unit pursuant to the offer generally will be treated as a capital
gain or loss and will be treated as long-term capital gain or loss if your
holding period for the unit exceeds one year. Long-term capital gains recognized
by individuals and certain other noncorporate taxpayers generally will be
subject to a maximum Federal income tax rate of 20%. If the amount realized with
respect to a unit attributable to your share of "unrealized receivables" of your
partnership exceeds the basis attributable to those assets, such excess will be
treated as ordinary income. Among other things, "unrealized receivables" include
depreciation recapture with respect to certain types of property. In addition,
the maximum Federal income tax rate applicable to persons who are noncorporate
taxpayers for net capital gains attributable to the sale of depreciable real
property (which may be determined to include an interest in a partnership such
as your partnership) held for more than one year is currently 25% (rather than
20%) to the extent of previously claimed depreciation deductions that would not
be treated as "unrealized receivables."
If you tender units in the offer, you will be allocated a share of your
partnership's taxable income or loss for the year of tender with respect to any
units sold or exchanged. Thus, you will recognize ordinary income or loss in an
amount equal to your partnership's accreted income or loss allocable to such
unit. You will not receive any future distributions on units that you tender on
or after the date on which such units are accepted for purchase, and
accordingly, you may not receive any distributions with respect to such accreted
income. Such allocation and any cash distributed by your partnership to you for
that year will affect your adjusted tax basis in your unit and, therefore, the
amount of your taxable gain or loss upon a sale of a unit pursuant to the offer.
PASSIVE ACTIVITY LOSSES
The passive activity loss rules of the Code limit the use of losses derived
from passive activities, which generally include investments in limited
partnership interests such as the units. An individual, as well as certain other
types of investors, generally cannot use losses from passive activities to
offset nonpassive activity income received during the taxable year. Passive
activity losses that are disallowed for a particular tax year are "suspended"
and may be carried forward to offset passive activity income earned by the
investor in future taxable years. In addition, such suspended losses may be
claimed as a deduction, subject to other applicable limitations, upon a taxable
disposition of the investor's interest in such activity.
Accordingly, if your investment in your partnership is treated as a passive
activity, you may be able to shelter gain from the sale of your units pursuant
to the offer with such losses in the manner described below. If you sell all or
a portion of your units pursuant to the offer and recognize a gain on such sale,
you will be entitled to use your current and "suspended" passive activity losses
(if any) from your partnership and other passive sources to offset that gain. If
you sell all or a portion of your units pursuant to the offer and recognizes a
loss on such sale, you will be entitled to deduct that loss currently (subject
to other applicable limitations) against the sum of your passive activity income
from your partnership for that year (if any) plus any passive activity income
from other sources for that year. If you sell all of your units pursuant to the
offer, the balance of any "suspended" losses that were not otherwise utilized
against passive activity income as described in the two preceding sentences will
no longer be suspended and will therefore be deductible (subject to any other
applicable limitations) by you against any other income for that year,
regardless of the character of that income. Accordingly, you should consult your
tax advisor concerning whether, and the extent to which, you have available
suspended passive activity losses from your partnership or other investments
that may be used to offset gain from the sale of your units pursuant to the
offer.
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<PAGE> 2090
FOREIGN OFFEREES
Gain recognized by a foreign person on a transfer of a unit for cash, OP
Units, or a combination thereof, pursuant to the offer will be subject to
Federal income tax under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). In such event, under the FIRPTA provisions of the Code, the AIMCO
Operating Partnership will be required to deduct and withhold 10% of the amount
realized by a foreign person on the disposition. Amounts would be creditable
against the foreign person's Federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return. See the Instructions to the Letter of Transmittal.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
APPLICABLE TO YOU AS A RESULT OF A SALE OR EXCHANGE OF UNITS PURSUANT TO THE
OFFER.
VALUATION OF UNITS
We determined our cash offer consideration by estimating the proceeds that
you would receive if your partnership were liquidated. For this purpose, we
estimated the value of each property owned by your partnership using the direct
capitalization method. This method involves applying a capitalization rate to
the property's annual net operating income. We determined appropriate
capitalization rates using our best judgment, but our valuation is just an
estimate. In reaching the capitalization rate, we considered the property's
physical condition, location and above-market mortgage interest rates. In
addition, we considered the recent decline in the market for equity securities,
including those of REITs, and the decline in the availability of commercial
mortgage financing. Although the direct capitalization method is a widely
accepted way of valuing real estate, there are a number of other methods
available to value real estate, each of which may result in different valuations
of a property. The proceeds that you would receive if you sold your units to
someone else or if your partnership were actually liquidated might be higher or
lower than our cash offer consideration. We determined our cash offer
consideration as follows:
- First, we calculated the value of the property owned by your partnership
using the direct capitalization method. We selected capitalization rates
based on our experience in valuing similar properties. The lower the
capitalization rate applied to a property's income, the higher its value.
We considered local market sales information for comparable properties,
estimated actual capitalization rates (net operating income less capital
reserves divided by sales price) and then evaluated each property in
light of its relative competitive position, taking into account property
location, occupancy rate, overall property condition and other relevant
factors. The AIMCO Operating Partnership believes that arms-length
purchasers would base their purchase offers on capitalization rates
comparable to those used by us, however there is no single correct
capitalization rate and others might use different rates. We multiplied
each property's 1997 net operating income by its capitalization rate to
derive a gross property value as described in the following table:
<TABLE>
<CAPTION>
1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME RATE VALUE
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
Aspen Ridge Apartments................... $ % $
Sutton Place Apartments..................
51 North High Building...................
</TABLE>
- Second, we calculated the value of the equity of your partnership by
adding to the aggregate gross property value of all properties owned by
your partnership, the value of the non-real estate assets of your
partnership, and deducting the liabilities of your partnership, including
mortgage debt and debt owed by your partnership to its general partner or
its affiliates after consideration of any applicable subordination
provisions affecting payment of such debt. We deducted from this value
any taxes and certain other costs including required capital expenditures
and deferred maintenance to derive a net equity value for your
partnership of $ .
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<PAGE> 2091
- Third, using this net equity value, we determined the proceeds that would
be paid to holders of units in the event of a liquidation of your
partnership, based on the terms of your partnership's agreement of
limited partnership. Our cash offer consideration represents the per unit
liquidation proceeds determined in this manner.
<TABLE>
<S> <C>
Aggregate net operating income (January 1, 1997 to December
31, 1997)................................................. $
Capitalization rate (weighted average)......................
Aggregate gross valuation of your partnership's
properties................................................
Plus: Cash and cash equivalents.............................
Plus: Other partnership assets, net of security deposits....
Less: Mortgage debt, including accrued interest.............
Less: Notes payable, including accrued interest.............
Less: Accounts payable and accrued expenses.................
Less: Other liabilities.....................................
Partnership valuation before taxes and certain costs........
Less: Disposition fees......................................
Less: Extraordinary capital expenditures for deferred
maintenance...............................................
Less: Municipal transfer taxes..............................
Less: Closing costs.........................................
Net valuation of your partnership...........................
Percentage of liquidation proceeds allocated to units.......
Net valuation of units......................................
Total number of units.............................
Valuation per unit.......................................... $
-----------
Cash consideration per unit.................................
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration by the liquidation
preference of $100 per Preferred OP Unit.
- In order to determine the number of Common OP Units we are offering you,
we divided the cash offer consideration by $ , which
represents the closing price of AIMCO's Class A Common Stock on the New
York Stock Exchange on , 1998.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
The AIMCO Operating Partnership has a majority ownership interest in the
general partner of your partnership. Therefore, the general partner of your
partnership makes no recommendation whether you should tender or refrain from
tendering your units. The AIMCO Operating Partnership has retained Stanger to
conduct an analysis of the offer and to render an opinion as to the fairness to
unitholders of the offer consideration from a financial point of view. Stanger
is not affiliated with AIMCO or your partnership. Stanger is one of the leaders
in the field of analyzing and evaluating complex real estate transactions.
However, we provided much of the information used by Stanger in forming its
fairness opinion. We believe the information provided to Stanger is accurate in
all material respects. See "Stanger Analysis." You should make your decision
whether to tender based upon a number of factors, including your financial
needs, other financial opportunities available to you and your tax position.
S-49
<PAGE> 2092
The terms of our offer have been established by us and are not the result
of arms-length negotiations. In evaluating the fairness of the offer, the
general partner of your partnership and the AIMCO Operating Partnership
considered the following factors and information:
1. The opportunity for you to make an individual decision on whether to
tender your units in the offer and that the offer allows each investor to
continue to hold his or her units.
2. The estimated value of your partnership's property has been
determined based on a method believed to reflect the valuation of such
assets by buyers in the market.
3. An analysis of the possible alternatives including liquidation and
continuation without the option of the offer. See "Background and Reasons
for the Offer -- Alternatives Considered."
4. An evaluation of the financial condition and results of operations of
your partnership and the AIMCO Operating Partnership and their anticipated
level of operating results. The offer is not expected to have an effect on
your partnership's financial condition or results of operations.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are financially equivalent to
your interest in your partnership, adjusted to reflect the expenses of the
offer. See "Valuation of Units."
6. The opinion of Stanger, an independent third party, that the offer
consideration is fair to holders of units from a financial point of view.
See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
9. The fact that the offer provides holders of units with the
opportunity to defer taxes.
10. An evaluation of the market price of the Class A Common Stock and
the limited information on prices at which Common OP Units and units are
transferred. See "Your Partnership -- Distributions and Transfers of
Units." No assurance can be given that the Class A Common Stock will
continue to trade at its current price.
11. The estimated unit value of $ , based on an estimated value of
your partnership's property of $ . The general partner of your
partnership has no present intention to liquidate your partnership or to
sell or finance your partnership's property. See "Background and Reasons
for the Offer".
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $ , current annualized distributions with respect to the
Common OP Units are $2.25. This is equivalent to distributions of $
per year on the number of tax-deferral % Preferred OP Units, or
distributions of $ per year on the number of tax deferral Common OP
Units, that you would receive in exchange for each of your partnership's
units. Your partnership has not paid distributions since 1990. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units
that we are offering are expected to be , immediately following our
offer, than the distributions with respect to your units. See "Comparison
of Ownership of Your Units and AIMCO OP Units -- Distributions."
In evaluating these factors, the general partner of your partnership and
the AIMCO Operating Partnership did not quantify or otherwise attach particular
weight to any of them.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. The terms of the
offer have been established by the AIMCO Operating Partnership and are not the
result of arms-length negotiations. See "Conflicts of Interest." The general
partner of your partnership and the AIMCO Operating Partnership believe that the
valuation method
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<PAGE> 2093
described in "Valuation of Units" provides a meaningful indication of value
for residential apartment properties although there are other ways to value real
estate. A liquidation in the future might generate a higher price for holders of
units.
The future value of the OP Units received in the offer will depend on some
of the same factors that will affect the value of the units, primarily the
condition of the real estate markets. However, if you exchange your units for OP
Units, you will be able to liquidate your investment only by tendering your OP
Units for redemption after a one-year holding period or by selling your OP
Units, which may preclude you from realizing the full value of your investment.
FAIRNESS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS
The general partner of your partnership makes no recommendation as to
whether you should tender or refrain from tendering your units. If you choose
not to tender any units, your interest in your partnership will remain
unchanged. The identity of the other limited partners of your partnership may
change. If the AIMCO Operating Partnership acquires a substantial number of
units pursuant to the offer, AIMCO may be in a position to influence voting
decisions with respect to your partnership. AIMCO has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, the general partner of
your partnership has attempted to compare the cash offer consideration against:
(a) the prices at which the units have been sold in the illiquid secondary
market; and (b) estimates of the value of the units on a liquidation basis. The
general partner of your partnership believes that analyzing the alternatives in
terms of estimated value, established based upon currently available data and,
where appropriate, reasonable assumptions made in good faith, establishes a
reasonable framework for comparing alternatives. Since the value of the
consideration for alternatives to the Offer is dependent upon varying market
conditions, no assurance can be given that the estimated values reflect the
range of possible values. See "Valuation of Units."
The results of these comparative analyses are summarized in the following
chart. You should bear in mind that the estimated values assigned to the
alternate forms of consideration are based on a variety of assumptions that have
been made by the general partner of your partnership. These assumptions relate,
among other things to: projections as to the future income, expenses, cash flow
and other significant financial matters of your partnership; and the
capitalization rates that will be used by prospective buyers when your
partnership's assets are liquidated.
In addition, these estimates are based upon certain information available
to the general partner of your partnership at the time the estimates were
computed, and no assurance can be given that the same conditions analyzed by it
in arriving at the estimates of value would exist at the time of the offer. The
assumptions used have been determined by the general partner of your partnership
in good faith, and, where appropriate, are based upon current and historical
information regarding your partnership and current real estate markets, and have
been highlighted below to the extent critical to the conclusions of the general
partner of your partnership. The estimated values in the following chart are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may vary from those set forth
below based on numerous factors, including interest rate fluctuations, tax law
changes, supply and demand for similar
S-51
<PAGE> 2094
apartment properties, the manner in which your partnership's property is
sold and changes in availability of capital to finance acquisitions of apartment
properties.
COMPARISON TABLE
<TABLE>
<S> <C>
Cash offer price............................................ $
Alternatives:
Prices on secondary market................................ $3.42 to $55.00
Estimated liquidation proceeds............................ $
</TABLE>
Prices on Secondary Market
Secondary market sales activity for the units, including privately
negotiated sales, has been limited and sporadic. According to information
obtained from the general partner of your partnership, from January 1, 1996 to
September 30, 1998 an aggregate of 51,878.6 units (representing less than 28.9%
of the total outstanding units) was transferred (excluding units transferred by
Insignia to IPLP in February 1998 and in tender offers) in sale transactions.
Set forth in the table below are the high and low sales prices of units for the
quarterly periods from July 1, 1996 to June 30, 1998, as reported by the general
partner and by The Partnership Spectrum, which is an independent, third-party
source. The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported prices; thus the AIMCO Operating
Partnership does not know whether the information compiled by The Partnership
Spectrum is accurate or complete. The transfer paperwork submitted to the
general partner often does not include the requested price information or
contains conflicting information as to the actual sales price. Accordingly, you
should not rely upon this information as being completely accurate.
CONSOLIDATED CAPITAL PROPERTIES V
REPORTED SALES PRICES OF PARTNERSHIP UNITS
<TABLE>
<CAPTION>
AS REPORTED BY
AS REPORTED BY THE PARTNERSHIP
THE GENERAL PARTNER(a) SPECTRUM(b)
---------------------- ----------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Third Quarter................................... $15.00 $35.00 (d) (d)
Second Quarter.................................. 22.50 40.00 27.00 33.00
First Quarter................................... 17.00 55.00(c) 28.00 32.00
Fiscal Year Ended December 31, 1997: 19.00 19.00
Fourth Quarter.................................. 10.00 20.00
Third Quarter................................... 3.42 22.00 21.00 23.00
Second Quarter.................................. 4.42 26.00 19.00 22.00
First Quarter................................... 8.05 20.40 20.00 26.00
Fiscal Year Ended December 31, 1996:
Fourth Quarter.................................. 9.55 40.00 19.00 21.00
Third Quarter................................... 5.00 24.00 15.00 20.00
Second Quarter.................................. 9.33 25.60 -- --
First Quarter................................... 8.00 80.00 -- --
</TABLE>
- ---------------
(a) Although the general partner requests and records information on the prices
at which units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The general partner processes transfers of units only 12
times per year -- on the
S-52
<PAGE> 2095
first day of each month. The prices in the table are based solely on
information provided to the general partner by sellers and buyers of units
transferred in sale transactions (i.e., excluding transactions believed to
result from the death of a limited partner, rollover to an IRA account,
establishment of a trust, trustee to trustee transfers, termination of a
benefit plan, distributions from a qualified or non-qualified plan, uniform
gifts, abandonment of units or similar non-sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported prices. The AIMCO
Operating Partnership does not know whether the information compiled by The
Partnership Spectrum is accurate or complete.
(c) The general partner has information that indicates this reported sales
price represented a single, isolated transaction for a minimal number of
units and such sales price was materially higher than the range of sales
prices for all other transactions during the quarter. The purchase price is
approximately 9% greater than the highest reported sales price of $32.00
per unit for other transactions during the six-month period prior to June
30, 1998.
(d) Information not yet published.
The AIMCO Operating Partnership believes that, although secondary market
sales information probably is not a reliable measure of value because of the
limited and inefficient nature of the market for units, this information may be
relevant to a limited partner's decision as to whether to tender his or her
units pursuant to the offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units) are
the only means available to a limited partner to liquidate an investment in
units (other than the offer) because the units are not listed or traded on any
exchange or quoted on NASDAQ.
Estimated Liquidation Proceeds
Liquidation value is a measure of the price at which the assets of your
partnership would sell if disposed of in an arms-length transaction between a
willing buyer and your partnership, each having access to relevant information
regarding the historical revenues and expenses of the business. The general
partner of your partnership estimated the liquidation value of units using the
same direct capitalization method and assumptions as we did in valuing the units
for the cash offer consideration. See "Valuation of Units." The only significant
difference is that the general partner of your partnership assumed liquidation
would involve additional selling expenses of % of the sale proceeds. The
general partner of your partnership believes this is a normal and customary cost
of property sales. The liquidation analysis also assumed that your partnership's
property was sold to an independent third-party buyer at the current property
value and that other balance sheet assets (excluding amortizing assets) and
liabilities of your partnership were sold at their book value, and that the net
proceeds of sale were allocated to your partners in accordance with your
partnership's agreement of limited partnership.
The liquidation analysis assumes that the assets of your partnership are
sold in a single transaction. Should the assets be liquidated over time, even at
prices equal to those projected, distributions to limited partners from cash
flow from operations might be reduced because your partnership's relatively
fixed costs, such as general and administrative expenses, are not
proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales of the assets are assumed to occur
concurrently. The liquidation analysis assumes that the assets would be disposed
of in an orderly manner and not sold in forced or distressed sales where sellers
might be expected to dispose of their interests at substantial discounts to
their actual fair market value.
S-53
<PAGE> 2096
In estimating the net liquidation proceeds, your general partner
considered, among other things, the following valuations:
Appraisals. Aspen Ridge Apartments and Sutton Place Apartments were
appraised in 1996 by an independent, third party appraiser, Koeppel Tener Real
Estate Services, Inc. (the "Appraiser"), in connection with a refinancing of
each property. According to the appraisal reports, the scope of the appraisal
included an inspection of each property and an analysis of the surrounding
market. The Appraiser relied principally on the income capitalization approach
to valuation and secondarily on the sales comparison approach, and represented
that its report was prepared in accordance with the Code of Professional Ethics
and Standards of Professional Appraisal Practice of the Appraisal Institute and
the Uniform Standards of Professional Appraisal Practice, and in compliance with
the Appraisal Standards set forth in the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 (known as "FIRREA"). The estimated market value of
the fee simple estate of each of the properties specified in those appraisal
reports was $9,100,000 for Aspen Ridge Apartments and $4,700,000 for Sutton
Place Apartments. Copies of the summaries of the appraisals have been filed as
exhibits to the AIMCO Operating Partnership's Tender Offer Statement on Schedule
14D-1 filed with the SEC. Independent appraisals have not been conducted for the
partnership's other property in the past three years.
General Partner's Annual Estimates of Net Asset Value. Your general partner
prepared an estimate of your partnership's net asset value per unit in
connection with an offer to purchase up to 4.9% of the outstanding units
commenced by an unaffiliated party in September 1998. That estimate of your
partnership's net asset value per unit as of June 30, 1998 was $49.00. This
estimated net asset value is based on a hypothetical sale of the partnership's
properties and the distribution to the limited partners and the general partner
of the gross proceeds of such sales, net of related indebtedness, together with
the cash, proceeds from temporary investments, and all other assets that are
believed to have liquidation value, after provision in full for all of the other
known liabilities of your partnership. This net asset value does not take into
account (i) timing considerations or (ii) costs associated with winding up the
partnership. Therefore, the AIMCO Operating Partnership believes that this
estimate of net asset value per unit does not necessarily represent either the
fair market value of a unit or the amount a limited partner reasonably could
expect to receive if the partnership's properties were sold and the partnership
was liquidated. For this reason, the AIMCO Operating Partnership considered this
net asset value estimate to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
ALLOCATION OF CONSIDERATION
We have allocated the estimated liquidation proceeds in accordance with the
liquidation provisions of your partnership agreement of limited partnership.
Accordingly, % of the estimated liquidation proceeds are assumed to be
distributed to holders of units. See "Valuation of Units."
S-54
<PAGE> 2097
STANGER ANALYSIS
We engaged Stanger, an independent investment banking firm, to conduct an
analysis and to render an opinion (the "Fairness Opinion") as to whether the
offer consideration for the units is fair, from a financial point of view, to
the unitholders. We selected Stanger because of its experience in providing
similar services to other parties in connection with real estate merger and sale
transactions and Stanger's experience and reputation in connection with real
estate partnerships and real estate assets. No other investment banking firm was
engaged to provide, or has provided, any report, analysis or opinion relating to
the fairness of our offer.
Stanger has advised us that, subject to the assumptions, limitations and
qualifications contained in its Fairness Opinion, the offer consideration for
the units is fair, from a financial point of view, to the unitholders. We
determined the offer consideration, and Stanger did not, and was not requested
to, make any recommendations as to the form or amount of consideration to be
paid in connection with the offer.
The full text of the Fairness Opinion, which contains a description of the
matters considered and the assumptions, limitations and qualifications made, is
set forth as Appendix A hereto and should be read in its entirety. The summary
set forth herein does not purport to be a complete description of the review
performed by Stanger in rendering the Fairness Opinion. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial analysis or
amenable to summary description.
We imposed no conditions or limitations on the scope of Stanger's
investigation or with respect to the methods and procedures to be followed in
arriving at the fairness opinion. See "-- Assumptions, Limitations and
Qualifications." We have agreed to indemnify Stanger against certain liabilities
arising out of Stanger's engagement to prepare and deliver the Fairness Opinion.
EXPERIENCE OF STANGER
Since its founding in 1978, Stanger and its affiliates have provided
information, research, investment banking and consulting services to clients
located throughout the United States, including major New York Stock Exchange
member firms, insurance companies and over seventy companies engaged in the
management and operation of partnerships and real estate investment trusts. The
investment banking activities of Stanger include financial advisory and fairness
opinion services, asset and securities valuations, industry and company research
and analysis, litigation support and expert witness services, and due diligence
investigations in connection with both publicly registered and privately placed
securities transactions.
Stanger, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, reorganizations and for estate, tax, corporate and other purposes.
Stanger's valuation practice principally involves partnerships, partnership
securities and the assets typically held through partnerships, such as real
estate, oil and gas reserves, cable television systems and equipment leasing
assets. Stanger was selected because of its experience and reputation in
connection with real estate partnerships, real estate assets and mergers and
acquisitions.
SUMMARY OF MATERIALS CONSIDERED
In the course of Stanger's analysis to render its opinion, Stanger: (i)
reviewed a draft of the Prospectus Supplement related to the offer in
substantially the form which will be distributed; (ii) reviewed your
partnership's annual reports on Form 10-KSB filed with the SEC for the years
ending December 31, 1996 and 1997, and the quarterly report on Form 10-QSB for
the period ending June 30, 1998, which reports your partnership's management has
indicated to be the most current available financial statements; (iii) reviewed
descriptive information concerning your partnership's properties provided by
management, including location, number of units and unit mix or square footage,
age, and amenities; (iv) reviewed summary historical operating statements for
your partnership's properties for 1996 and 1997 and through June 30, 1998; (v)
reviewed operating budgets for your partnership's properties for 1998, as
prepared by your partnership; (vi) reviewed information prepared by management
relating to any debt encumbering your partnership's properties; (vii) reviewed
information regarding market rental rates and conditions for similar properties
in the general market area of your partnership's properties and other
information relating to acquisition criteria for
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<PAGE> 2098
similar properties; (viii) reviewed internal financial analyses and
forecasts prepared by your partnership of the estimated current net liquidation
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; (x) reviewed available trading information for the units;
and (xi) conducted other studies, analysis and inquiries as Stanger deemed
appropriate.
In addition, Stanger discussed with management of your partnership and
AIMCO the market conditions for the properties, conditions in the market for
sales/acquisitions of properties similar to that owned by your partnership,
historical, current and projected operations and performance of your
partnership's property and your partnership, the physical condition of your
partnership's properties including any deferred maintenance, and other factors
influencing value of your partnership's properties and your partnership. Stanger
also performed site inspections of your partnership's properties, reviewed local
real estate market conditions, and discussed with property management personnel
conditions in local apartment rental markets and market conditions for sales and
acquisitions of properties similar to your partnership's properties.
SUMMARY OF REVIEWS
The following is a summary of the material reviews conducted by Stanger in
connection with and in support of its Fairness Opinion. The summary of the
opinion and reviews of Stanger set forth in this Prospectus Supplement is
qualified in its entirety by reference to the full text of such opinion.
Property Evaluation. In preparing its Fairness Opinion, Stanger performed a
site inspection of your partnership's properties during October and November
1998. In the course of the site visit, the physical facilities of your
partnership's properties were observed, current rental and occupancy information
was obtained, current local market conditions were reviewed, similar competing
properties were identified, and local property management personnel were
interviewed concerning your partnership's properties and local market
conditions. Stanger also reviewed and relied upon information provided by your
partnership and AIMCO, including, but not limited to, financial schedules of
historical and current rental rates, occupancies, income, expenses, reserve
requirements, cash flow and related financial information; property descriptive
information including unit mix; and information relating to the condition of the
properties, including any deferred maintenance, capital budgets, status of
ongoing or newly planned property additions, reconfigurations, improvements and
other factors affecting the physical condition of the property improvements.
Stanger also reviewed historical operating statements for your
partnership's property for 1996, 1997, and for the six month period ending June
30, 1998, the operating budget for 1998 as prepared by your partnership and
discussed with management the current and anticipated operating results of your
partnership's properties.
In addition, Stanger interviewed management personnel of your partnership
and AIMCO. Such interviews included discussions of conditions in the local
market, economic and development trends affecting your partnership's properties,
historical and budgeted operating revenues and expenses and occupancies and the
physical condition of your partnership's properties (including any deferred
maintenance and other factors affecting the physical condition of the
improvements), projected capital expenditures and building improvements, the
terms of existing debt, encumbering your partnership's properties, and
expectations of management regarding operating results of your partnership's
properties.
Stanger also reviewed the acquisition criteria used by owners and investors
in the type of real estate owned by your partnership, utilizing available
published information and information derived from interviews conducted by
Stanger with various real estate owners and investors.
Review of Partnership Liquidation Analysis. Stanger reviewed an analysis
prepared by the management of your partnership of the estimated liquidation
values of units utilizing estimates prepared by your partnership of expenses
associated with such a liquidation. The liquidation analysis assumed that your
partnership's properties were sold to an independent third-party buyer at the
current property value estimated by the management of your partnership and that
normal and customary costs of property sale were incurred, that other balance
sheet assets (excluding amortizing assets) and liabilities of your partnership
were sold at their book value, and that the net proceeds of sale were allocated
between the general and limited partners in accordance with your partnership
agreement of limited partnership.
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CONCLUSIONS
Stanger concluded, based upon its analysis of the foregoing and the
assumptions, qualifications and limitations stated below, as of the date of the
Fairness Opinion, that the offer consideration to be paid for the units in
connection with the offer is fair to the unitholders from a financial point of
view.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
In rendering the Fairness Opinion, Stanger relied upon and assumed, without
independent verification, the accuracy and completeness of all financial
information and data, and all other reports and information contained in this
Prospectus Supplement or that were provided, made available, or otherwise
communicated to Stanger by your partnership, AIMCO, or the management of the
partnership's property. Stanger has not performed an independent appraisal,
engineering study or environmental study of the assets and liabilities of your
partnership. Stanger relied upon the representations of your partnership and
AIMCO concerning, among other things, any environmental liabilities, deferred
maintenance and estimated capital expenditure and replacement reserve
requirements, the determination and valuation of non-real estate assets and
liabilities of your partnership, the allocation of your partnership's net values
between the general partner, special limited partner and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's properties, and the transaction costs and fees associated with a
sale of the properties. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's properties that any
financial statements, budgets, pro forma statements, projections, capital
expenditure estimates, debt, value estimates and other information contained in
this Prospectus Supplement or provided or communicated to Stanger were
reasonably prepared and adjusted on bases consistent with actual historical
experience, are consistent with the terms of your partnership's agreement of
limited partnership, and reflect the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
partnership's properties or other balance sheet assets and liabilities or other
information reviewed between the date of such information provided and the date
of the Fairness Opinion; that your partnership, AIMCO, and the management of the
partnership's properties are not aware of any information or facts that would
cause the information supplied to Stanger to be incomplete or misleading; that
the highest and best use of the partnership's properties is as improved; and
that all calculations were made in accordance with the terms of your
partnership's agreement of limited partnership.
Stanger was not requested to, and therefore did not: (i) select the offer
consideration or the method of determining the offer consideration; (ii) make
any recommendation to your partnership or its partners with respect to whether
to accept or reject the proposed offer or whether to accept the cash, Preferred
OP Units or Common OP Units if the offer is accepted; (iii) solicit any third
party indications of interest in acquiring the assets of your partnership or all
or any part of your partnership; or (iv) express any opinion as to (a) the tax
consequences of the offer to unitholders, (b) the terms of your partnership's
agreement of limited partnership or the terms of any agreements or contracts
between your partnership or AIMCO; (c) AIMCO's or the general partner's business
decision to effect the offer, or alternatives to the offer, (d) the amount or
allocation of expenses relating to the offer between AIMCO and your partnership
or tendering unitholders; (e) the relative value of the cash, Preferred OP Units
or Common OP Units to be issued in connection with the offer; and (f) any
adjustments made to determine the offer consideration and the net amounts
distributable to the unitholders, including but not limited to, balance sheet
adjustments to reflect your partnership's estimate of the value of current net
working capital balances, reserve accounts, and liabilities, and adjustments to
the offer consideration for distributions made by your partnership subsequent to
the date of the offer.
Stanger is not expressing any opinions as to the fairness of any terms of
the offer other than the offer consideration for the units. Stanger's opinion is
based on business, economic, real estate and capital market, and other
conditions as of the date of its analysis and addresses the offer in the context
of information available as of the date of its analysis. Events occurring after
such date and before the closing of the proposed offer could affect the
partnership's property or the assumptions used in preparing the Fairness
Opinion. Stanger has no obligation to update the Fairness Opinion on the basis
of subsequent events.
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In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written report or compendium of its
analysis for internal or external use beyond the report set forth in Appendix A.
COMPENSATION AND MATERIAL RELATIONSHIPS
Stanger has been retained by AIMCO to provide fairness opinions with
respect to your partnership and other partnerships which are or will be the
subject of similar offers. Stanger will be paid a fee by AIMCO of $ with
respect to your partnership. In addition, Stanger is entitled to reimbursement
for reasonable legal, travel and out-of-pocket expenses incurred in making the
site visits and preparing the Fairness Opinion, and is entitled to
indemnification against certain liabilities, including certain liabilities under
Federal securities laws. No portion of Stanger's fee is contingent upon
consummation of the offer or the content of Stanger's opinion. Stanger has
performed other services for AIMCO in the past, including: general financial
advisory services relating to a potential acquisition by AIMCO. However, such
acquisition was never completed and no fee was paid to Stanger.
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COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO OPERATING PARTNERSHIP
The information below highlights a number of the significant differences
between your partnership and the AIMCO Operating Partnership relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees, and investor rights.
The section immediately following this section compares certain of the
respective legal rights associated with the ownership of units with Common OP
Units and Preferred OP Units. These comparisons are intended to assist you in
understanding how your investment will be changed if, as a result of the offer,
your units are exchanged for Common OP Units or Preferred OP Units. FOR A
DISCUSSION OF CERTAIN OF THE SIGNIFICANT DIFFERENCES BETWEEN THE AIMCO OPERATING
PARTNERSHIP AND AIMCO, SEE "COMPARISON OF THE AIMCO OPERATING PARTNERSHIP AND
AIMCO" IN THE ACCOMPANYING PROSPECTUS. For a comparison of certain legal rights
associated with an investment in the Common OP Units and the Class A Common
Stock, and a similar comparison in respect of the Preferred OP Units and the
Class I Preferred Stock, see "Comparison of Common OP Units and Class A Common
Stock" in the accompanying Prospectus and "Comparison of Preferred OP Units and
Class I Preferred Stock" herein, respectively.
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Form of Organization and Assets Owned
<TABLE>
<S> <C>
Your partnership is a limited partnership organized The AIMCO Operating Partnership is organized as a
under California law. Delaware limited partnership. The AIMCO Operating
Partnership owns interests (either directly or through
subsidiaries) in numerous multifamily apartment
properties. The AIMCO Operating Partnership conducts
substantially all of the operations of AIMCO, a
corporation organized under Maryland and as a REIT.
</TABLE>
Duration of Existence
<TABLE>
<S> <C>
Your partnership was presented to limited partners as a The term of the AIMCO Operating Partnership continues
finite life investment, with limited partners to until December 31, 2093, unless the AIMCO Operating
receive regular cash distributions out of your Partnership is dissolved sooner pursuant to the terms
partnership's Distributable Cash From Operations (as of the AIMCO Operating Partnership's agreement of
defined in your partnership's agreement of limited limited partnership (the "AIMCO Operating Partnership
partnership). The termination date of your partnership Agreement") or as provided by law. See "Description of
is December 31, 2013. OP Units -- General" and "Description of OP
Units -- Dissolution and Winding Up" in the
accompanying Prospectus.
</TABLE>
Purpose and Permitted Activities
<TABLE>
<S> <C>
Your partnership has been formed to acquire, own, The purpose of the AIMCO Operating Partnership is to
improve, maintain, operate, lease, sell, dispose of, conduct any business that may be lawfully conducted by
finance and otherwise deal with your partnership's a limited partnership organized pursuant to the
property. Your partnership's objectives are to (1) Delaware Revised Uniform Limited Partnership Act (as
preserve and protect the limited partners' and amended from time to time, or any successor to such
unitholders' invested capital by investing, either statute) (the "Delaware Limited Partnership Act"),
alone or in association with others, in a diversified provided that such business is to be conducted in a
portfolio of income-producing properties, (2) provide manner that permits AIMCO to be qualified as a REIT,
gains through potential appreciation of the properties, unless AIMCO ceases to qualify as a REIT. The AIMCO
(3) build equity through reduction of mortgage loans, Operating Partnership is authorized to perform any and
(4) provide tax-sheltered quarterly distributions from all acts for the furtherance of the purposes and
operating; and (5) generate tax losses in excess of the business of the AIMCO Operating Partnership, provided
tax-sheltered cash distributions during the initial that the AIMCO Operating Partnership may not take, or
years of operation which may be used to offset taxable refrain from taking, any action which, in the judgment
income from other sources. Subject to restrictions of its general partner could (i) adversely affect the
contained in your partnership's agreement of limited ability of AIMCO to continue to qualify as a REIT, (ii)
partnership, your partnership may perform all acts subject AIMCO to certain income and excise taxes, or
necessary, advisable or convenient to the business of (iii) violate any law or regulation of any governmental
your partnership including borrowing money and creating body or agency (unless such action, or inaction, is
liens. specifically consented to by AIMCO). Subject to the
foregoing, the AIMCO Operating Partnership may invest
in or enter into partnerships, joint ventures, or
similar arrangements. The AIMCO Operating partnership
currently invests, and intends to continue to invest,
in a real estate portfolio primarily consisting of
multifamily rental apartment properties.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is authorized The general partner is authorized to issue additional
to issue additional limited partnership interests in partnership interests in the AIMCO Operating
your partnership and may admit additional limited Partnership for any partnership purpose from time to
partners by selling not more than 500,400 units for time to the limited partners and to other persons, and
cash to selected persons who fulfill the requirements to admit such other persons as additional limited
set forth in your partnership's agreement of limited partners, on terms and conditions and for such capital
partnership. The capital contribution need not be equal contributions as may be established by the general
for all limited partners and no action or consent is partner in its sole discretion. The net capital
required in connection with the admission of any contribution need not be equal for all OP Unitholders.
additional limited partners. The general partner may No action or consent by the OP Unitholders is required
not acquire properties in exchange for units. in connection with the admission of any additional OP
Unitholder. See "Description of OP Units -- Management
by the AIMCO GP" in the accompanying Prospectus.
Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one
or more series of any of such classes, with such
designations, preferences and relative, partici-
pating, optional or other special rights, powers and
duties as shall be determined by the general partner,
in its sole and absolute discretion without the
approval of any OP Unitholder, and set forth in a
written document thereafter attached to and made an
exhibit to the AIMCO Operating Partnership Agreement.
</TABLE>
Restrictions Upon Related Party Transactions
<TABLE>
<S> <C>
Under your partnership's agreement of limited The AIMCO Operating Partnership may lend or contribute
partnership, the general partner and its affiliates may funds or other assets to its subsidiaries or other
acquire units from time to time on their own behalf and persons in which it has an equity investment, and such
for their own benefit, provided that such right does persons may borrow funds from the AIMCO Operating
not create any preferences in rights or benefits in Partnership, on terms and conditions established in the
favor of such persons or permit them to buy units other sole and absolute discretion of the general partner. To
than at the same cash price and on the same terms as the extent consistent with the business purpose of the
are available to other non-affiliated limited partners. AIMCO Operating Partnership and the permitted
Your partnership may not make any loans to the general activities of the general partner, the AIMCO Operating
partner but the general partner may lend money to your Partnership may transfer assets to joint ventures,
partnership on terms, as to interest rates and other limited liability companies, partnerships,
finance charges and fees, not in excess of amount that corporations, business trusts or other business
are charged by unrelated banks on comparable loans for entities in which it is or thereby becomes a
the same purpose, and, if a property is involved, in participant upon such terms and subject to such
the locality of the property. No prepayment charge or conditions consistent with the AIMCO Operating Part-
penalty will be required by the general partner on a nership Agreement and applicable law as the general
loan to your partnership. To the extent the general partner, in its sole and absolute discretion, believes
partner lends proceeds to your partnership, on an to be advisable. Except as expressly permitted by the
unsecured basis, such amounts will bear interest at an AIMCO Operating Partnership Agreement, neither the
amount not to exceed the lesser of the actual cost to general partner nor any of its affiliates may sell,
the general partner or the most recent prime rate of transfer or convey any property to the AIMCO Operating
interest charged by Bank of America, N.A., San Partnership, directly or indirectly, except pursuant to
Francisco main office, in effect on the date such loan transactions that are determined by the general partner
if first created. Your partnership may not obtain in good faith to be fair and reasonable.
long-term financing from the general partner, except
that it may issue an "all-inclusive" or "wraparound"
note if certain conditions are satisfied. Your
partnership may not grant exclusive right to sell or
exclusive employment to sell property for your
partnership to the general partner. If certain
conditions are satisfied, the general partner or an
affiliate may provide insurance brokerage services to
your partnership. The general partner may not cause
your partnership to enter into any agreements with the
general partner or its affiliates which are not subject
to termination without penalty by either party upon not
more than sixty days' written notice. Your partnership
may not purchase or lease property in which a general
partner has an interest and may not acquire property
from any party in whom a general partner has an
interest. Notwithstanding the foregoing and according
to the terms of your partnership's agreement of limited
partnership, the general partner may purchase property
in its own name and temporarily hold title thereto for
the purpose of facilitating the acquisition of such
</TABLE>
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<PAGE> 2103
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
property or the borrowing of money or obtaining of
financing for your partnership, or the completion of
construction of the property, or any other purpose
related to the business of your partnership, provided
that such property is purchased by your partnership for
a price no greater than the cost of such property to
the general partner and provided there is no difference
in interest rates of the loans secured by the property
at the time acquired by the general partner and at the
time acquired by your partnership, nor any other
benefit to the general partner arising out of such
transaction apart from compensation otherwise permitted
by your partnership's agreement of limited partnership.
Your partnership may not sell or lease property to the
general partner.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is authorized The AIMCO Operating Partnership Agreement contains no
to obligate and bind your partnership and to take such restrictions on borrowings, and the general partner has
action as the general partner deems necessary or full power and authority to borrow money on behalf of
advisable, including, without limitation, making, the AIMCO Operating Partnership. The AIMCO Operating
executing and delivering loan agreements, mortgages, Partnership has credit agreements that restrict, among
security agreements, promissory notes, documents other things, its ability to incur indebtedness. See
related to mortgage-backed securities, and other "Risk Factors -- Risks of Significant Indebtedness" in
documents as provided for in your partnership's the accompanying Prospectus.
agreement of limited partnership. The total
indebtedness of your partnership may not exceed 80% of
the purchase price of all properties on a combined
basis. The general partner will use its best efforts to
obtain level payment financing on the most favorable
terms available to your partnership and will not obtain
first mortgage financing incurred in connection with
property purchases, where a provision for a balloon
payment is provided, which does not contain the
following provisions, unless it obtains prior approval
from the California Department of Corporations: (1)
that such balloon payment will not be due and payable
prior the greater of ten years or three years after the
expected holding period from the later of the inception
date of the loan or the acquisition date of the
property and (2) that such loan will have regular
payments in an amount which would be sufficient to
self-liquidate the loan over a 20- to 30-year period.
Secondary financing, if any, must be fully amortizing
or, if not fully amortizing, must not be due and
payable during the expected holding period of the
property. The foregoing restrictions do not apply with
respect to any existing original financing, secondary
financing in an amount equal to less than 10% of the
purchase price of a property. Your partnership may not
incur any non-recourse indebtedness wherein the lender
will have or acquire, at any time as a result of making
the loan any direct or indirect interest in the
profits, capital or property of your partnership other
than as a secured creditor.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership Each OP Unitholder has the right, upon written demand
entitles a limited partner, upon reasonable request, to with a statement of the purpose of such demand and at
inspect and copy during normal business hours the such OP Unitholder's own expense, to obtain a current
register kept by your partnership which lists the list of the name and last known business, residence or
names, addresses and business telephone numbers of all mailing address of the general partner and each other
limited partners and the number of units owned by each OP Unitholder.
limited partner. Upon request of a limited partner, the
general partner will promptly mail to such limited
partner a copy of the investor list. If the general
partner neglects or refuses to mail a copy of the
investor list as requested, the general partner may be
liable to the limited requesting the list for the cost
incurred by the limited partner in compelling the
production of the list and for actual damages incurred
by the limited partner.
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has the All management powers over the business and affairs of
exclusive right to manage and control the partnership's the AIMCO Operating Partnership are vested in AIMCO-GP,
business, to bind your partnership by its sole Inc., which is the general partner. No OP Unitholder
signature and take any action it deems necessary or has any right to participate in or exercise control or
advisable in connection with the business of your management power over the business and affairs of the
partnership. Subject to the limitations contained in AIMCO Operating Partnership. The OP Unitholders have
your partnership's agreement of limited partnership, the right to vote on certain matters described under
the general partner, on behalf of your partnership, may "Comparison of Ownership of Your Units and AIMCO OP
take any action it deems necessary or advisable in Units -- Voting Rights" below. The general partner may
connection with the business of your partnership not be removed by the OP Unitholders with or without
without the consent of the limited partners. No limited cause.
partner has any authority or right to act for or bind
your partnership or participate in or have any control In addition to the powers granted a general partner of
over your partnership business except as required by a limited partnership under applicable law or that are
law. granted to the general partner under any other
provision of the AIMCO Operating Partnership Agreement,
the general partner, subject to the other provisions of
the AIMCO Operating Partnership Agreement, has full
power and authority to do all things deemed necessary
or desirable by it to conduct the business of the AIMCO
Operating Partnership, to exercise all powers of the
AIMCO Operating Partnership and to effectuate the
purposes of the AIMCO Operating Partnership. The AIMCO
Operating Partnership may incur debt or enter into
other similar credit, guarantee, financing or
refinancing arrangements for any purpose upon such
terms as the general partner determines to be
appropriate, and may perform such other acts and duties
for and on behalf of the AIMCO Operating Partnership as
are provided in the AIMCO Operating Partnership
Agreement. The general partner is authorized to
execute, deliver and perform certain agreements and
transactions on behalf of the AIMCO Operating
Partnership without any further act, approval or vote
of the OP Unitholders.
</TABLE>
Management Liability and Indemnification
<TABLE>
<S> <C>
Under your partnership's agreement of limited Notwithstanding anything to the contrary set forth in
partnership, except in the case of negligence or the AIMCO Operating Partnership Agreement, the general
misconduct, the general partner and its affiliate or partner is not liable to the AIMCO Operating
agents acting on their behalf are not liable, responsi- Partnership for losses sustained, liabilities incurred
ble or accountable in damages or otherwise to your or benefits not derived as a result of errors in
partnership (in any action, including a partnership judgment or mistakes of fact or law of any act or
derivative suit) or to any of the limited partners for omission if the general partner acted in good faith.
the doing of any act or the failure to do any act, the The AIMCO Operating Partnership Agreement provides for
effect of which may cause or result in loss or damage indemnification of AIMCO, or any director or officer of
to your partnership, if done in good faith to promote AIMCO (in its capacity as the previous general partner
the best interests of your partnership. The general of the AIMCO Operating Partnership), the general
partner and its affiliates or agents are entitled to be partner, any officer or director of general partner or
indemnified by your partnership from assets of your the AIMCO Operating Partnership and such other persons
partnership, or as an expense of your partnership, but as the general partner may designate from and against
not from the limited partners, against any liability or all losses, claims, damages, liabilities, joint or
loss, as a result of any claim or legal proceeding several, expenses (including legal fees), fines,
(whether or not the same proceeds to judgment or is settlements and other amounts incurred in connection
settled or otherwise brought to a conclusion) relating with any actions relating to the operations of the
to the performance or nonperformance of any act AIMCO Operating Partnership, as set forth in the AIMCO
concerning the activities of your partnership except in Operating Partnership Agreement. The Delaware Limited
the case where the general partner or its affiliates or Partnership Act provides that subject to the standards
agents are guilty of bad faith, negligence, misconduct and restrictions, if any, set forth in its partnership
or reckless disregard of duty, provided such act or agreement, a limited partnership may, and shall have
omission was done in good faith to promote the best the power to, indemnify and hold harmless any partner
interests of your partnership. The indemnification or other person from and against any and all claims and
authorized by your partnership's agreement of limited demands whatsoever. It is the position of the
partnership includes the payment of reasonable Securities and Exchange Commission that indemnification
attorneys' fees and other expenses (not limited to of directors and officers for liabilities arising under
taxable costs) incurred in settling or defending any the Securities Act is against public policy and is
claims, threatened action or finally adjudicated legal unenforceable pursuant to Section 14 of the Securities
proceedings. Notwithstanding the foregoing, neither the Act of 1933.
general partner nor any officer, director, employee,
agent, subsidiary or assign of the general partner or
its affiliates are indemnified from any liability, loss
or damage incurred by them in connection
</TABLE>
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<PAGE> 2105
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
with (1) any claim or settlement involving allegations
that the Securities Act of 1933 was violated by the
general partner or by any such other person or entity
unless: (i) the general partner or other persons or
entities seeking indemnification are successful in
defending such action and (ii) such indemnification is
specifically approved by a court of law which is
advised as to the current position of both the
Securities and Exchange Commission and the California
Commissioner of Corporations regarding indemnifica-
tion for violations of securities laws; or (2) any
liability imposed by law, including liability for
fraud, bad faith or negligence.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of limited Except in limited circumstances, the general partner
partnership, the general partners may remove the has exclusive management power over the business and
general partner upon a vote of the holders of the affairs of the AIMCO Operating Partnership. The general
majority of the outstanding units and the prior written partner may not be removed as general partner of the
consent of the general partner. The limited partners AIMCO Operating Partnership by the OP Unitholders with
may elect a general partner upon a vote of the limited or without cause. Under the AIMCO Operating Partnership
partners owning a majority of the outstanding units. No Agreement, the general partner may, in its sole
limited partner may substitute a transferee of his discretion, prevent a transferee of an OP Unit from
units in such limited partner's place without the becoming a substituted limited partner pursuant to the
consent of the general partner which may be withheld at AIMCO Operating Partnership Agreement. The general
the sole discretion of the general partner. partner may exercise this right of approval to deter,
delay or hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating Partner-
ship. Additionally, the AIMCO Operating Partnership
Agreement contains restrictions on the ability of OP
Unitholders to transfer their OP Units. See
"Description of OP Units -- Transfers and Withdrawals"
in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Your partnership's agreement of limited partnership may With the exception of certain circumstances set forth
be amended by the general partner without the consent in the AIMCO Operating Partnership Agreement, whereby
of the limited partners to add to the representations, the general partner may, without the consent of the OP
duties, or obligations of the general partner or its Unitholders, amend the AIMCO Operating Partnership
affiliates or to surrender any rights or powers granted Agreement, amendments to the AIMCO Operating
to the general partner or its affiliates for the Partnership Agreement require the consent of the
benefit of the limited partners, to comply with federal holders of a majority of the outstanding Common OP
and state securities laws and to cure any ambiguities. Units, excluding AIMCO and certain other limited
Other amendments to our partnership's agreement of exclusions (a "Majority in Interest"). Amendments to
limited partnership must be approved by the limited the AIMCO Operating Partnership Agreement may be
partners owning more than 50% of the units. However, proposed by the general partner or by holders of a
the limited partners may not amend your partnership's Majority in Interest. Following such proposal, the
agreement of limited partnership (1) to extend your general partner will submit any proposed amendment to
partnership term or (2) to alter the rights of the the OP Unitholders. The general partner will seek the
general partner to receive compensation, return of written consent of the OP Unitholders on the proposed
invested capital, allocations, and distributions, amendment or will call a meeting to vote thereon. See
without the consent of the general partner. Also, a "Description of OP Units -- Amendment of the AIMCO
unanimous vote of the limited partners is required to Operating Partnership Agreement" in the accompanying
amend the provision in your partnership's agreement of Prospectus.
limited partnership dealing with substituted limited
partners.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
Your general partner receives an annual management fee The general partner does not receive compensation for
of up to 9% of Distributed Cash From Operations for its its services as general partner of the AIMCO Operating
services as general partner of your partnership and may Partnership. However, the general partner is entitled
also receive reimbursement for expenses incurred in its to payments, allocations and distributions in its
capacity as general partner. capacity as general partner of the AIMCO Operating
Partnership. In addition, the AIMCO Operating Part-
nership is responsible for all expenses incurred
relating to the AIMCO Operating Partnership's ownership
of its assets and the operation of the AIMCO Operating
Partnership and reimburses the general partner for such
expenses paid by the general partner. The employees of
the AIMCO Operating Partnership receive compensation
for their services.
</TABLE>
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<PAGE> 2106
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Liability of Investors
<TABLE>
<S> <C>
Under California law, a limited partner is not bound by Except for fraud, willful misconduct or gross
the obligations of your partnership. A limited partner negligence, no OP Unitholder has personal liability for
is liable only to make payments of his capital the AIMCO Operating Partnership's debts and
contribution when due under your partnership's obligations, and liability of the OP Unitholders for
agreement of limited partnership. After its capital the AIMCO Operating Partnership's debts and obligations
contribution is fully paid, no limited partner will, is generally limited to the amount of their invest-
except as otherwise required by applicable law, be ment in the AIMCO Operating Partnership. However, the
required to make any further capital contributions or limitations on the liability of limited partners for
lend any funds to your partnership. the obligations of a limited partnership have not been
clearly established in some states. If it were
determined that the AIMCO Operating Partnership had
been conducting business in any state without compli-
ance with the applicable limited partnership statute,
or that the right or the exercise of the right by the
holders of OP Units as a group to make certain
amendments to the AIMCO Operating Partnership Agreement
or to take other action pursuant to the AIMCO Operating
Partnership Agreement constituted participation in the
"control" of the AIMCO Operating Partnership's
business, then a holder of OP Units could be held
liable under certain circumstances for the AIMCO
Operating Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of limited Unless otherwise provided for in the relevant
partnership, the general partner must diligently and partnership agreement, Delaware law generally requires
faithfully devote as much of its time, but is not a general partner of a Delaware limited partnership to
required to devote its full time, to the business of adhere to fiduciary duty standards under which it owes
your partnership and must at all times act in a its limited partners the highest duties of good faith,
fiduciary manner toward your partnership and the fairness and loyalty and which generally prohibit such
limited partners. The general partner at all times has general partner from taking any action or engaging in
a fiduciary responsibility for the safekeeping and use any transaction as to which it has a conflict of
of all partnership funds and assets. The general interest. The AIMCO Operating Partnership Agreement
partner may assign some of its general partner expressly authorizes the general partner to enter into,
functions to an affiliate; provided, however, that, on behalf of the AIMCO Operating Partnership, a right
notwithstanding any such assignment, the general of first opportunity arrangement and other conflict
partner will retain full responsibility to your avoidance agreements with various affiliates of the
partnership for the satisfactory performance of all AIMCO Operating Partnership and the general partner, on
partnership general partner duties. The general partner such terms as the general partner, in its sole and
may not commingle funds of your partnership with any absolute discretion, believes are advisable. The AIMCO
other person. Subject to its fiduciary duties, general Operating Partnership Agreement expressly limits the
partner and its affiliates may engage in whatever liability of the general partner by providing that the
activities they chose, whether the same are competitive general partner, and its officers and directors will
with your partnership or otherwise, without having or not be liable or accountable in damages to the AIMCO
incurring any obligation to offer any interest in such Operating Partnership, the limited partners or
activities to your partnership or any party hereto. The assignees for errors in judgment or mistakes of fact or
obligations of the parties are, therefore, limited law or of any act or omission if the general partner or
solely to those arising from the acquisition and such director or officer acted in good faith. See
holding of your partnership's properties. "Description of OP Units -- Fiduciary Responsibilities"
in the accompanying Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material differences between The AIMCO Operating Partnership is not subject to
the taxation of your partnership and the AIMCO Federal income taxes. Instead, each holder of OP Units
Operating Partnership. includes in income its allocable share of the AIMCO
Operating Partnership's taxable income or loss when it
determines its individual Federal income tax liability.
Income and loss from the AIMCO Operating Partnership
may be subject to the passive activity limitations. If
an investment in an OP Unit is treated as a passive
activity, income and loss from the AIMCO Operating
Partnership generally can be offset against income and
loss from other investments that constitute "passive
activities" (unless the AIMCO Operating Partnership is
considered a "publicity traded partnership", in which
case income and
</TABLE>
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<PAGE> 2107
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
loss from the AIMCO Operating Partnership can only be
offset against other income and loss from the AIMCO
Operating Partnership). Income of the AIMCO Operating
Partnership, however, attributable to dividends from
the Management Subsidiaries (as defined below) or
interest paid by the Management Subsidiaries does not
qualify as passive activity income and cannot be offset
against losses from "passive activities."
Cash distributions by the AIMCO Operating Partnership
are not taxable to a holder of OP Units except to the
extent they exceed such Partner's basis in its interest
in the AIMCO Operating Partnership (which will include
such OP Unitholder's allocable share of the AIMCO
Operating Partnership's nonrecourse debt).
Each year, OP Unitholders receive a Schedule K-1 tax
form containing tax information for inclusion in
preparing their Federal income tax returns.
OP Unitholders are required, in some cases, to file
state income tax returns and/or pay state income taxes
in the states in which the AIMCO Operating Partnership
owns property or transacts business, even if they are
not residents of those states. The AIMCO Operating
Partnership may be required to pay state income taxes
in certain states.
</TABLE>
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Nature of Investment
<TABLE>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity equity interests entitling each equity interests entitling each OP
interests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of distri- and as declared by the board of rata share of cash distributions
butions to be made to the partners directors of the general partner of made from Available Cash (as such
of your partnership. the AIMCO Operating Partnership, term is defined in the AIMCO
quarterly cash distribution at a Operating Partnership Agreement) to
rate of $ per Preferred OP the partners of the AIMCO Operating
Unit, subject to adjustments from Partnership. To the extent the
time to time on or after the fifth AIMCO Operating Partnership sells
anniversary of the issue date of or refinances its assets, the net
the Preferred OP Units. proceeds therefrom generally will
be retained by the AIMCO Oper-
ating Partnership for working
capital and new investments rather
than being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's agreement Except as otherwise required by Under the AIMCO Operating Partner-
of limited partnership, upon the applicable law or in the AIMCO ship Agreement, the OP Unitholders
vote of the limited partners owning Operating Partnership Agreement, have voting rights only with
a majority of the outstanding the holders of the Preferred OP respect to certain limited matters
units, the limited partners may Units will have the same voting such as certain amendments and
amend your partnership's agreement rights as holders of the Common OP termination of the AIMCO Operating
of limited partnership, subject to Units. See "Description of OP Partnership Agreement and certain
certain exceptions; terminate your Units" in the accompanying transactions such as the
partnership; remove or elect a Prospectus. So long as any institution of bankruptcy
general partner; and approve other Preferred OP Units are outstand- proceedings, an assignment for the
matters as otherwise provided in ing, in addition to any other vote benefit of creditors and certain
your partnership's agreement of or consent of partners required by transfers by the general partner of
limited partnership. Unless prior law or by the AIMCO Operating its interest in the AIMCO Operating
consent Partnership Agree- Part-
</TABLE>
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<PAGE> 2108
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
of the limited partners holding a ment, the affirmative vote or nership or the admission of a
majority of the units of your consent of holders of at least 50% successor general partner.
partnership is obtained, the of the outstanding Preferred OP
general partner is prohibited from Units will be necessary for Under the AIMCO Operating Partner-
(1) selling substantially all of effecting any amendment of any of ship Agreement, the general partner
your partnership's assets in a the provisions of the Partnership has the power to effect the
single sale or in multiple sales in Unit Designation of the Preferred acquisition, sale, transfer,
the same 12-month period, except in OP Units that materially and exchange or other disposition of
the orderly liquidation and winding adversely affects the rights or any assets of the AIMCO Operating
up of the business, (2) pledging preferences of the holders of the Partnership (including, but not
the credit of your partnership in Preferred OP Units. The creation or limited to, the exercise or grant
any way except in the ordinary issuance of any class or series of of any conversion, option,
course of business, (3) executing partnership units, including, privilege or subscription right or
or delivering any assignment for without limitation, any partner- any other right available in
the benefit of the creditors of ship units that may have rights connection with any assets at any
your partnership, and (4) senior or superior to the Preferred time held by the AIMCO Operating
releasing, assigning or OP Units, shall not be deemed to Partnership) or the merger,
transferring a partnership claim, materially adversely affect the consolidation, reorganization or
security, commodity or any other rights or preferences of the other combination of the AIMCO
asset in your partnership without holders of Preferred OP Units. With Operating Partnership with or into
full and adequate consideration. respect to the exercise of the another entity, all without the
above described voting rights, each consent of the OP Unitholders.
A general partner may cause the Preferred OP Units shall have one
dissolution of your partnership by (1) vote per Preferred OP Unit. The general partner may cause the
retiring. Your partnership may be dissolution of the AIMCO Operating
continued by the remaining general Partnership by an "event of
partner or, if none, the limited withdrawal," as defined in the
partners may agree to continue your Delaware Limited Partnership Act
partnership by electing a successor (including, without limitation,
general partner upon the vote of bankruptcy), unless, within 90 days
holders of more than 50% of the after the withdrawal, holders of a
units within 60 days after the "majority in interest," as defined
retirement of the general partner. in the Delaware Limited Partnership
Act, agree in writing, in their
sole and absolute discretion, to
continue the business of the AIMCO
Operating Partnership and to the
appointment of a successor general
partner. The general partner may
elect to dissolve the AIMCO
Operating Partnership in its sole
and absolute discretion, with or
without the consent of the OP
Unitholders. See "Description of OP
Units -- Dissolution and Winding
Up" in the accompanying Prospectus.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement of Holders of Preferred OP Units will Subject to the rights of holders of
limited partnership specifies how be entitled to receive, when and as any outstanding Preferred OP Units,
the cash available for declared by the board of directors the AIMCO Operating Partnership
distribution, whether arising from of the general partner of the AIMCO Agreement requires the general
operations or sales or refinancing, Operating Partnership, quarterly partner to cause the AIMCO
is to be shared among the partners. cash distributions at the rate of Operating Partnership to dis-
Distributions of Distributable Cash $ per Preferred OP Unit; tribute quarterly all, or such
From Operations (as defined in your provided, however, that at any time portion as the general partner may
partnership's agreement of limited and from time to time on or after in its sole and absolute discretion
partnership) are to be made the fifth anniversary of the issue determine, of Available Cash (as
quarterly during the fiscal year date of the Preferred OP Units, the defined in the AIMCO Operating
after the minimum units are sold. AIMCO Operating Partnership may Partnership Agreement) generated by
The distributions payable to the adjust the annual distribution rate the AIMCO Operating Partnership
partners are not fixed in amount on the Preferred OP Units to the during such quarter to the general
and depend upon the operating lower of (i) % plus the annual partner, the special limited
results and net sales or interest rate then applicable to partner and the holders of Common
refinancing proceeds available from U.S. Treasury notes with a maturity OP Units on the record date
the disposition of your of five years, and (ii) the annual established by the general partner
partnership's assets. dividend rate on the most recently with respect to such quarter, in
issued AIMCO non-convertible accordance with their respective
preferred stock which ranks on a interests in the AIMCO Operating
parity with its Class H Cumu- Partnership on such record date.
Holders of any other Pre-
</TABLE>
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<PAGE> 2109
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
lative Preferred Stock. Such ferred OP Units issued in the
distributions will be cumulative future may have priority over the
from the date of original issue. general partner, the special
Holders of Preferred OP Units will limited partner and holders of
not be entitled to receive any Common OP Units with respect to
distributions in excess of distributions of Available Cash,
cumulative distributions on the distributions upon liquidation or
Preferred OP Units. No interest, or other distributions. See "Per Share
sum of money in lieu of interest, and Per Unit Data" in the
shall be payable in respect of any accompanying Prospectus.
distribution payment or payments on
the Preferred OP Units that may be The general partner in its sole and
in arrears. absolute discretion may distribute
to the OP Unitholders Available
When distributions are not paid in Cash on a more frequent basis and
full upon the Preferred OP Units or provide for an appropriate record
any Parity Units, all distributions date.
declared upon the Preferred OP
Units and any Parity Units shall be The AIMCO Operating Partnership
declared ratably in proportion to Agreement requires the general
the respective amounts of partner to take such reasonable
distributions accumulated, accrued efforts, as determined by it in its
and unpaid on the Preferred OP sole and absolute discretion and
Units and such Parity Units. Unless consistent with AIMCO's
full cumulative distributions on qualification as a REIT, to cause
the Preferred OP Units have been the AIMCO Operating Partnership to
declared and paid, except in distribute sufficient amounts to
limited circumstances, no enable the general partner to
distributions may be declared or transfer funds to AIMCO and enable
paid or set apart for payment by AIMCO to pay stockholder dividends
the AIMCO Operating Partnership and that will (i) satisfy the
no other distribution of cash or requirements for qualifying as a
other property may be declared or REIT under the Code and the
made, directly or indirectly, by Treasury Regulations and (ii) avoid
the AIMCO Operating Partnership any Federal income or excise tax
with respect to any Junior Units, liability of AIMCO. See
nor shall any Junior Units be re- "Description of OP
deemed, purchased or otherwise Units -- Distributions" in the
acquired for consideration, nor accompanying Prospectus.
shall any other cash or other
property be paid or distributed to
or for the benefit of holders of
Junior Units. See "Description of
Preferred OP
Units -- Distributions."
</TABLE>
Liquidity and Transferability/Redemption Rights
<TABLE>
<S> <C> <C>
A limited partner may not sell, There is no public market for the There is no public market for the
transfer, encumber or otherwise Preferred OP Units and the OP Units. The AIMCO Operating Part-
dispose by operation of law or Preferred OP Units are not listed nership Agreement restricts the
otherwise of the whole or any part on any securities exchange. The transferability of the OP Units.
of his interest in your partnership Preferred OP Units are subject to Until the expiration of one year
except by written instrument restrictions on transfer as set from the date on which an OP
satisfactory in form to the general forth in the AIMCO Operating Unitholder acquired OP Units,
partner, accompanied by the Partnership Agreement. subject to certain exceptions, such
assurance of the genuineness and OP Unitholder may not transfer all
effectiveness of each such Pursuant to the AIMCO Operating or any portion of its OP Units to
signature and the obtaining of any Partnership Agreement, until the any transferee without the consent
federal and/or state governmental expiration of one year from the of the general partner, which
approval, if any, as may be date on which a holder of Preferred consent may be withheld in its sole
reasonably required by the general OP Units acquired Preferred OP and absolute discretion. After the
partner. A minimum of twelve units Units, subject to certain expiration of one year, such OP
may be transferred, other than for exceptions, such holder of Unitholder has the right to
transferors who reside in Missouri Preferred OP Units may not transfer transfer all or any portion of its
at the time of transfer who are all or any portion of its Pre- OP Units to any person, subject to
required to transfer a minimum of ferred OP Units to any transferee the satisfaction of certain
twenty units, except for transfers without the consent of the general conditions specified in the AIMCO
by gift or inheritance, intrafamily partner, which consent may be Operating Partnership Agreement,
transfers, family dissolutions and withheld in its sole and absolute including the general partner's
transfers to affiliates. No discretion. After the expiration of right of first refusal. See
assignment is valid or effective one year, such holders of Preferred "Description of OP Units --
unless in compliance with the OP Units has the right to transfer Transfers and Withdrawals" in the
conditions contained herein. No all or any portion of its Preferred accompanying Prospectus.
partner may make any assignment of OP Units to any person, subject to
all or any part of his interest if the satisfaction of
said transfer or
</TABLE>
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<PAGE> 2110
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
assignment would, when considered certain conditions specified in the After the first anniversary of
with all other transfers made AIMCO Operating Partnership Agree- becoming a holder of Common OP
during the same applicable 12-month ment, including the general Units, an OP Unitholder has the
period, cause a termination of your partner's right of first refusal. right, subject to the terms and
partnership for federal or any conditions of the AIMCO Operating
applicable state income tax After a one-year holding period, a Partnership Agreement, to require
purposes. Such transferee may be holder may redeem Preferred OP the AIMCO Operating Partnership to
substituted as a limited partner Units and receive in exchange redeem all or a portion of the
if, in addition to the above therefor, at the AIMCO Operating Common OP Units held by such party
requirements: (1) the assignor Partnership's option, (i) subject in exchange for a cash amount based
designates such intention in the to the terms of any Senior Units, on the value of shares of Class A
instrument of assignment, (2) the cash in an amount equal to the Common Stock. See "Description of
written consent of the general Liquidation Preference of the OP Units -- Redemption Rights" in
partner is obtained, the granting Preferred OP Units tendered for the accompanying Prospectus. Upon
of which is in the general redemption, (ii) a number of shares receipt of a notice of redemption,
partner's sole discretion, (3) the of Class I Cumulative Preferred the AIMCO Operating Partnership
assignment instrument is in form Stock of AIMCO that pay an may, in its sole and absolute
and substance satisfactory to the aggregate amount of dividends yield discretion but subject to the
general partner, (4) the assignor equivalent to the distributions on restrictions on the ownership of
and assignee duly execute and the Preferred OP Units tendered for Class A Common Stock imposed under
acknowledge such other instrument redemption and are part of a class AIMCO's charter and the transfer
or instruments as the general or series of preferred stock that restrictions and other limitations
partner may deem necessary or is then listed on the New York thereof, elect to cause AIMCO to
desirable and (5) the assignee Stock Exchange or another national acquire some or all of the tendered
accepts, adopts and approves in securities exchange, or (iii) a Common OP Units in exchange for
writing all of the terms and number of shares of Class A Common Class A Common Stock, based on an
provisions of your partnership's Stock of AIMCO that is equal in exchange ratio of one share of
agreement of limited partnership. Value to the Liquidation Preference Class A Common Stock for each Com-
of the Preferred OP Units tendered mon OP Unit, subject to adjustment
for redemption. The Preferred OP as provided in the AIMCO Operating
Units may not be redeemed at the Partnership Agreement.
option of the AIMCO Operating
Partnership. See "Description of
Preferred OP Units -- Redemption."
</TABLE>
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<PAGE> 2111
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are a class of Partnership Preferred Units of the
AIMCO Operating Partnership.
RANKING
The Preferred OP Units will, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the AIMCO Operating Partnership,
effectively rank:(i) prior or senior to the Class E Partnership Preferred Units,
the Common OP Units and any other interest in the AIMCO Operating Partnership if
the holders of Preferred OP Units shall be entitled to the receipt of
distributions and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of such interest (the Common OP
Units and such other interests are collectively referred to herein as "Junior
Units"); (ii) on a parity with the Class B Partnership Preferred Units, the
Class C Partnership Preferred Units, the Class D Partnership Preferred Units,
the Class G Partnership Preferred Units, the Class H Partnership Preferred
Units, and with any other interest in the AIMCO Operating Partnership if the
holders of such interest and the Preferred OP Units shall be entitled to the
receipt of distributions and amounts distributable upon liquidation, dissolution
or winding up in proportion to their respective amounts of accumulated, accrued
and unpaid distributions or stated preferences, without preference or priority
of one over the other ("Parity Units"); and (iii) junior to the Class F
Partnership Preferred Units and any other interest in the AIMCO Operating
Partnership if the holders of such interest shall be entitled to the receipt of
distributions or amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Preferred OP Units ("Senior
Units"). Junior Units, Parity Units and Senior Units may be issued from time to
time by the AIMCO Operating Partnership without any approval or consent by
holders of the Preferred OP Units.
Although proceeds upon liquidation, dissolution or winding up of the AIMCO
Operating Partnership will be made in accordance with the positive balance of
all partners capital accounts, the AIMCO Operating Partnership creates, to the
extent possible, the preference upon such events by specially allocating income,
if necessary, to the Preferred OP Units in an amount equal to their liquidation
preference.
DISTRIBUTIONS
Holders of Preferred OP Units are entitled to receive, when and as declared
by the board of directors of the general partner of the AIMCO Operating
Partnership, quarterly cash distributions at the rate of $ per Preferred
OP Unit (equivalent to % per annum of the $100 stated liquidation
preference); provided, however, that at any time and from time to time on or
after the fifth anniversary of the issue date of the Preferred OP Units, the
AIMCO Operating Partnership may adjust the annual distribution rate on the
Preferred OP Units to the lower of (i) % plus the annual interest rate
then applicable to U.S. Treasury notes with a maturity of five years, and (ii)
the annual dividend rate on the most recently issued AIMCO non-convertible
preferred stock which ranks on a parity with its Class H Cumulative Preferred
Stock. Such adjustment shall become effective upon the date the AIMCO Operating
Partnership issues a notice to such effect to the holders of the Preferred OP
Units. Such distributions are cumulative from the date of original issue,
whether or not in any distribution period or periods such distributions have
been declared, and shall be payable quarterly on February 15, May 15, August 15
and November 15 of each year (or, if not a business day, the next succeeding
business day) (each a "Distribution Payment Date"), commencing on the first such
date occurring after the date of original issue. If the Preferred OP Units are
issued on any day other than a Distribution Payment Date, the first distribution
payable on such Preferred OP Units will be prorated for the portion of the
quarterly period that such Preferred OP Units are outstanding on the basis of
twelve 30-day months and a 360-day year. Distributions are payable in arrears to
holders of record as they appear on the records of the AIMCO Operating
Partnership at the close of business on the February 1, May 1, August 1 or
November 1, as the case may be, immediately preceding each Distribution Payment
Date. Holders of Preferred OP Units will not be entitled to receive any
distributions in excess of cumulative distributions on the Preferred OP Units.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any
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<PAGE> 2112
distribution payment or payments on the Preferred OP Units that may be in
arrears. Holders of any Preferred OP Units that are issued after the date of
original issuance are entitled to receive the same distributions as holders of
any Preferred OP Units issued on the date of original issuance.
When distributions are not paid in full upon the Preferred OP Units or any
Parity Units, or a sum sufficient for such payment is not set apart, all
distributions declared upon the Preferred OP Units and any Parity Units shall be
declared ratably in proportion to the respective amounts of distributions
accumulated, accrued and unpaid on the Preferred OP Units and accumulated,
accrued and unpaid on such Parity Units. Except as set forth in the preceding
sentence, unless distributions on the Preferred OP Units equal to the full
amount of accumulated, accrued and unpaid distributions have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof has been or contemporaneously is set apart for such payment,
for all past distribution periods, no distributions shall be declared or paid or
set apart for payment by the AIMCO Operating Partnership with respect to any
Parity Units. Unless full cumulative distributions (including all accumulated,
accrued and unpaid distributions) on the Preferred OP Units have been declared
and paid, or declared and set apart for payment, for all past distribution
periods, no distributions (other than distributions or distributions paid in
Junior Units or options, warrants or rights to subscribe for or purchase Junior
Units) may be declared or paid or set apart for payment by the AIMCO Operating
Partnership and no other distribution of cash or other property may be declared
or made, directly or indirectly, by the AIMCO Operating Partnership with respect
to any Junior Units, nor shall any Junior Units be redeemed, purchased or
otherwise acquired (except for a redemption, purchase or other acquisition of
Common OP Units made for purposes of an employee incentive or benefit plan of
AIMCO, the AIMCO Operating Partnership or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such Junior Units), directly or indirectly, by the AIMCO
Operating Partnership (except by conversion into or exchange for Junior Units,
or options, warrants or rights to subscribe for or purchase Junior Units), nor
shall any other cash or other property be paid or distributed to or for the
benefit of holders of Junior Units. Notwithstanding the foregoing provisions of
this paragraph, the AIMCO Operating Partnership shall not be prohibited from (i)
declaring or paying or setting apart for payment any distribution on any Parity
Units or (ii) redeeming, purchasing or otherwise acquiring any Parity Units, in
each case, if such declaration, payment, redemption, purchase or other
acquisition is necessary to maintain AIMCO's qualification as a REIT.
ALLOCATION
Holders of Preferred OP Units will be allocated net income of the AIMCO
Operating Partnership in an amount equal to the distributions made on such
holder's Preferred OP Units during the taxable year. Holders of Preferred OP
Units also will generally be allocated any net loss of the AIMCO Operating
Partnership that is not allocated to holders of Common OP Units or other
interests of the AIMCO Operating Partnership.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the AIMCO Operating Partnership, before any allocation of income or gain by the
AIMCO Operating Partnership shall be made to or set apart for the holders of any
Junior Units, to the extent possible, the holders of Preferred OP Units shall be
entitled to be allocated income and gain to effectively enable them to receive a
liquidation preference (the "Liquidation Preference") of $100 per Preferred OP
Unit (the "Stated Preference"), plus accumulated, accrued and unpaid
distributions (whether or not earned or declared) to the date of final
distribution to such holders; but such holders shall not be entitled to any
further allocation of income or gain. Until the holders of the Preferred OP
Units have been paid the Liquidation Preference in full, no allocation of income
or gain will be made to any holder of Junior Units upon the liquidation,
dissolution or winding up of the AIMCO Operating Partnership. If, upon any
liquidation, dissolution or winding up of the AIMCO Operating Partnership, the
assets of the AIMCO Operating Partnership, or proceeds thereof, distributable
among the holders of Preferred OP Units shall be insufficient to pay in full the
above described preferential amount and liquidating payments on any Parity
Units, then following certain allocations made by the AIMCO Operating
Partnership, such assets, or the proceeds thereof, shall be distributed among
the holders of Preferred
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OP Units and any such Parity Units ratably in the same proportion as the
respective amounts that would be payable on such Preferred OP Units and any such
Parity Units if all amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of the AIMCO Operating
Partnership will not include a consolidation or merger of the AIMCO Operating
Partnership with one or more partnerships, corporations or other entities, or a
sale or transfer of all or substantially all of the AIMCO Operating
Partnership's assets. Upon any liquidation, dissolution or winding up of the
AIMCO Operating Partnership, after all allocations shall have been made in full
to the holders of Preferred OP Units and any Parity Units to enable them to
receive their Liquidation Preference, any Junior Units shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Preferred OP Units and any Parity Units shall not be entitled to share
therein.
REDEMPTION
The Preferred OP Units may not be redeemed at the option of the AIMCO
Operating Partnership, and will not be required to be redeemed or repurchased by
the AIMCO Operating Partnership or AIMCO except if a holder of a Preferred OP
Unit effects a redemption, as described below. The AIMCO Operating Partnership
or AIMCO may purchase Preferred OP Units from time to time in the open market,
by tender or exchange offer, in privately negotiated purchases or otherwise.
After a one-year holding period, a holder may redeem Preferred OP Units and
receive in exchange therefor, at the AIMCO Operating Partnership's option, (i)
subject to the terms of any Senior Units, cash in an amount equal to the
Liquidation Preference of the Preferred OP Units tendered for redemption, (ii) a
number of shares of Class I Preferred Stock of AIMCO that pay an aggregate
amount of dividends equivalent to the distributions on the Preferred OP Units
tendered for redemption; provided that such shares are part of a class or series
of preferred stock that is then listed on the New York Stock Exchange or another
national securities exchange, or (iii) a number of shares of Class A Common
Stock of AIMCO that is equal in Value to the Liquidation Preference of the
Preferred OP Units tendered for redemption. The "Value" of shares of Class A
Common Stock will be determined based on a 10-day average trading price of the
shares, as set forth in the AIMCO Operating Partnership's agreement of limited
partnership. If shares of Class I Preferred Stock or Class A Common Stock of
AIMCO are issued in exchange for any Preferred OP Units tendered for redemption,
the Preferred OP Units that are acquired by AIMCO will be converted to a class
of AIMCO Operating Partnership units that corresponds to the class of stock so
issued.
VOTING RIGHTS
Except as otherwise required by applicable law or in the AIMCO Operating
Partnership's agreement of limited partnership, the holders of the Preferred OP
Units will have the same voting rights as holders of the Common OP Units. See
"Description of OP Units" in the accompanying Prospectus. So long as any
Preferred OP Units are outstanding, in addition to any other vote or consent of
partners required by law or by the AIMCO Operating Partnership's agreement of
limited partnership, the affirmative vote or consent of holders of at least 50%
of the outstanding Preferred OP Units will be necessary for effecting any
amendment of any of the provisions of the Partnership Unit Designation of the
Preferred OP Units that materially and adversely affects the rights or
preferences of the holders of the Preferred OP Units. The creation or issuance
of any class or series of AIMCO Operating Partnership units, including, without
limitation, any AIMCO Operating Partnership units that may have rights senior or
superior to the Preferred OP Units, will not be deemed to materially adversely
affect the rights or preferences of the holders of Preferred OP Units. With
respect to the exercise of the above described voting rights, each Preferred OP
Unit will have one (1) vote per Preferred OP Unit.
RESTRICTIONS ON TRANSFER
Preferred OP Units will be subject to the same restrictions on transfer
applicable to Common OP Units, as set forth in the AIMCO Operating Partnership's
agreement of limited partnership.
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DESCRIPTION OF CLASS I PREFERRED STOCK
The Class I Preferred Stock (a) ranks prior to the Class A Common Stock and
the Class E Preferred Stock, and any other class or series of capital stock of
AIMCO if the holders of the Class I Preferred Stock are to be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution,
and winding-up in preference or priority to the holders of shares of such class
or series ("Class I Junior Stock"), (b) ranks on a parity with the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class G Preferred Stock, the Class H Preferred Stock and with any other class or
series of capital stock of AIMCO, if the holders of such class of stock or
series and the Class I Preferred Stock are entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding-up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Class I Parity Stock") and (c) ranks junior to any class or series of capital
stock of AIMCO if the holders of such class or series are entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding-up in preference or priority to the holders of the Class I Preferred
Stock ("Class I Senior Stock").
Holders of Class I Preferred Stock are entitled to receive cash dividends
at the rate of % per annum of the $25 liquidation preference (equivalent to
$ per annum per share). Such dividends are cumulative from the date of
original issue, and are payable quarterly on or before January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 1999. Upon any
liquidation, dissolution or winding up of AIMCO, before payment or distribution
by AIMCO may be made to or set apart for the holders of any shares of Class I
Junior Stock, the holders of Class I Preferred Stock are entitled to receive a
liquidation preference of $25 per share (the "Class I Liquidation Preference"),
plus an amount equal to all accumulated, accrued and unpaid dividends to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If proceeds available for distribution are
insufficient to pay the preference described above and any liquidating payments
on any other shares of any class or series of Class I Parity Stock, then such
proceeds will be distributed among the holders of Class I Preferred Stock and
any such other Class I Parity Stock ratably in the same proportion as the
respective amount that would be payable on such Class I Preferred Stock and any
such other Class I Parity Stock if all amounts payable thereon were paid in
full.
On and after , , AIMCO may redeem shares of
Class I Preferred Stock, in whole or in part, at a cash redemption price equal
to 100% of the Class I Liquidation Preference plus all accrued and unpaid
dividends to the date fixed for redemption. The Class I Preferred Stock has no
stated maturity and is not subject to any sinking fund or mandatory redemption
provisions.
Holders of shares of Class I Preferred Stock have no voting rights, except
that if distributions on Class I Preferred Stock or any series or class of Class
I Parity Stock are in arrears for six or more quarterly periods, the number of
directors constituting the AIMCO board of directors will be increased by two and
the holders of Class I Preferred Stock (voting together as a single class with
all other shares of Class I Parity Stock, which are entitled to similar voting
rights) will be entitled to vote for the election of the two additional
directors of AIMCO at any annual meeting of stockholders or at a special meeting
of the holders of the Class I Preferred Stock called for the purpose. The
affirmative vote of the holders of two-thirds of the outstanding shares of Class
I Preferred Stock will be required to amend the AIMCO charter in any manner that
would adversely affect the rights of the holders of Class I Preferred Stock, and
to approve the issuance of any capital stock that ranks senior to the Class I
Preferred Stock with respect to payment of dividends or upon liquidation,
dissolution, winding up or otherwise.
Ownership of shares of Class I Preferred Stock by any person will be
limited such that the sum of the aggregate value of all capital stock of AIMCO
(including all shares of Class I Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
aggregate value of all shares of capital stock of AIMCO over (ii) the aggregate
value of all shares of capital stock of AIMCO (the "Class I Preferred Ownership
Limit"). The AIMCO board of directors may waive such ownership limit if evidence
satisfactory to the AIMCO board of directors and AIMCO's tax counsel is
presented that such ownership will not then or
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in the future jeopardize AIMCO's status as a REIT. As a condition of such
waiver, the AIMCO board of directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of AIMCO. If shares of Class I Preferred Stock in
excess of the Class I Preferred Ownership Limit, or shares of Class I Preferred
Stock which would result in AIMCO being "closely held," within the meaning of
Section 856(h) of the Code, or which would otherwise result in AIMCO failing to
qualify as a REIT, are issued or transferred to any person, such issuance or
transfer will be null and void to the intended transferee, and the intended
transferee would acquire no rights to the Class I Preferred Stock. Shares of
Class I Preferred Stock transferred in excess of the Class I Preferred Ownership
Limit or other applicable limitations will automatically be transferred to a
trust for the exclusive benefit of one or more qualifying charitable
organizations to be designated by AIMCO. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. The trustee of such trust may
transfer such shares to a person whose ownership of such shares does not violate
the Class I Preferred Ownership Limit or other applicable limitation. Upon a
sale of such shares by the trustee, the interest of the charitable beneficiary
will terminate, and the sales proceeds would be paid, first, to the original
intended transferee, to the extent of the lesser of (a) such transferee's
original purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price received by the
trustee, and, second, any remainder to the charitable beneficiary. In addition,
shares of Class I Preferred Stock held in such trust are purchasable by AIMCO
for a 90-day period at a price equal to the lesser of the price paid for the
Class I Preferred Stock by the original intended transferee (or the original
market value of such shares if purportedly acquired by gift or devise) and the
market price for the Class I Preferred Stock on the date that AIMCO determines
to purchase the Class I Preferred Stock. The 90-day period commences on the date
of the violative transfer or the date that the AIMCO board of directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Class I Preferred Stock bear a
legend referring to the restrictions described above.
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COMPARISON OF PREFERRED OP UNITS AND CLASS I PREFERRED STOCK
PREFERRED OP UNITS CLASS I PREFERRED STOCK
Nature of Investment
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The Preferred OP Units constitute equity interests The Class I Preferred Stock constitutes an equity
entitling each holder of Preferred OP Units to receive, interest entitling each holder of Class I Preferred
when and as declared by the board of directors of the Stock to receive, when and as declared by the AIMCO
general partner of the AIMCO Operating Partnership, board of directors, cash distribution at a rate of
quarterly cash distribution at a rate of $ per $ per annum per share.
Preferred OP Unit, subject to adjustments from time to
time on or after the fifth anniversary of the issue
date of the Preferred OP Units.
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Voting Rights
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Except as otherwise required by applicable law or in Holders of Class I Preferred Stock do not have any
the AIMCO Operating Partnership's agreement of limited voting rights, except as set forth below and except as
partnership, the holders of the Preferred OP Units will otherwise required by applicable law.
have the same voting rights as holders of the Common OP
Units. See "Description of OP Units" in the If and whenever dividends on any shares of Class I
accompanying Prospectus. So long as any Preferred OP Preferred Stock or any series or class of Class I
Units are outstanding, in addition to any other vote or Parity Stock are in arrears for six or more quarterly
consent of partners required by law or by the AIMCO periods (whether or not consecutive), the number of
Operating Partnership's agreement of limited directors then constituting the AIMCO board of
partnership, the affirmative vote or consent of holders directors shall be increased by two (if not already
of at least 50% of the outstanding Preferred OP Units increased by reason of similar types of provisions with
will be necessary for effecting any amendment of any of respect to shares of voting preferred stock), and the
the provisions of the Partnership Unit Designation of holders of shares of Class I Preferred Stock, together
the Preferred OP Units that materially and adversely with the holders of shares of all other voting
affects the rights or preferences of the holders of the preferred stock then entitled to exercise similar
Preferred OP Units. The creation or issuance of any voting rights, voting as a single class regardless of
class or series of AIMCO Operating Partnership units, series, will be entitled to vote for the election of
including, without limitation, any AIMCO Operating two additional directors of AIMCO. Whenever dividends
Partnership units that may have rights senior or supe- in arrears and dividends for the current quarterly
rior to the Preferred OP Units, will not be deemed to dividend period have been paid or declared and set
materially adversely affect the rights or preferences aside in respect of the outstanding shares of the Class
of the holders of Preferred OP Units. With respect to I Preferred Stock and the voting preferred stock, then
the exercise of the above described voting rights, each the right of the holders of Class I Preferred Stock and
Preferred OP Units will have one (1) vote per Preferred the voting preferred stock to elect such additional two
OP Unit. directors will cease and the terms of office of such
directors will terminate.
The affirmative vote or consent of at least 66 2/3% of
the votes entitled to be cast by the holders of Class I
Preferred Stock and Class I Parity Stock entitled to
vote on such matters, voting as a single class, will be
required to (i) authorize, create, increase the
authorized amount of, or issue any shares of any class
of Class I Senior Stock or any security convertible
into shares of any class of Class I Senior Stock, or
(ii) amend, alter or repeal any provision of, or add
any provision to, the AIMCO charter or by-laws, if such
action would materially adversely affect the voting
powers, rights or preferences of the holders of the
Class I Preferred Stock; provided, however, that no
such vote of the Class I Preferred Stockholders shall
be required if, at or prior to the time such proposed
change, provisions are made for the redemption of all
outstanding shares of Class I Preferred Stock. The
amendment of the AIMCO charter to authorize, create,
increase or decrease the authorized amount of or to
issue Class I Junior Stock, Class I Preferred Stock or
any shares of any class of Class I Parity Stock shall
not be deemed to materially adversely affect the voting
powers, rights or preferences of the holders of Class I
Preferred Stock.
With respect to the exercise of the above described
voting rights, each share of Class I Preferred Stock
will have one vote per share, except that when any
other class or series of preferred stock has the right
to vote with the Class I Preferred Stock as a single
class, then the Class I Preferred Stock and such other
class or series shall have one quarter of one vote per
$25 of stated liquidation preference.
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
Distributions
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